The owner of Genuine Subs, Inc., hopes to expand the present operation by adding

Question

The owner of Genuine Subs, Inc., hopes to expand the present operation by adding one new outlet. She has studied three locations. Each would have the same labor and materials costs (food, serving containers, napkins, etc.) of $1.70 per sandwich. Sandwiches sell for $2.65 each in all locations. Rent and equipment costs would be $5,020 per month for location A, $5,520 per month for location B, and $5,700 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $9,500. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Location Monthly Volume A B C b-1. If expected sales at A, B, and C are 20,600 per month, 22,800 per month, and 23,200 per month, respectively, calculate the profit of the each locations? (Omit the "$" sign in your response.) Location Monthly Profits A $ B $ C $ b-2. Which location would yield the greatest profits? Location A Location B Location C rev: 05_01_2015_QC_CS-14735 HintsReferenceseBook & Resources WorksheetDifficulty: 1 Easy Problem 8-2Learning Objective: 08-07 Use the techniques presented to evaluate location alternatives.

Explanation / Answer

Answer a) A B C S.P. Per unit 2.65 2.65 2.65 LABOR& MAT COST PER UNIT 1.7 1.7 1.7 Contribution margin 0.95 0.95 0.95 SP-Labor cost RENT 5020 5520 5700 Required Profit 9500 9500 9500 Req. Volume 15284 15811 16000 (profit+rent)/contribution margin Answer b) sales 20600 22800 23200 gross margin=Sales*0.95 19570 21660 22040 minus rent 9500 9500 9500 Profit 10070 12160 12540

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