The owner of Genuine Subs, Inc., hopes to expand the present operation by adding
ID: 405136 • Letter: T
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 $1.76 cents per sandwich. Sandwiches sell for $2.65 each in all locations. Rent and equipment costs would be $5,000 per month for location A, $5,500 per month for location B, and $5,800 per month for location C. a.
Determine the volume necessary at each location to realize a monthly profit of $10,000.
b.
If expected sales at A, B, and C are 21,000 per month, 22,000 per month, and 23,000 per month, respectively, which location would yield the greatest profits?
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 $1.76 cents per sandwich. Sandwiches sell for $2.65 each in all locations. Rent and equipment costs would be $5,000 per month for location A, $5,500 per month for location B, and $5,800 per month for location C. a.
Determine the volume necessary at each location to realize a monthly profit of $10,000.
b.
If expected sales at A, B, and C are 21,000 per month, 22,000 per month, and 23,000 per month, respectively, which location would yield the greatest profits?
Explanation / Answer
for location A:
use the equation X*gross profit per sub - fixed costs=11,000
so X*(2.57-1.54) - 5030=11000
solving for X=15,564 subs
other locations use the same formula, substituting in the new fixed costs. To find the most profitable location, insert # of subs made for X, put in the corresponding rent for that location, and replace the 11,000 with X to find the gross profit
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