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 $1.20 per sandwich. Sandwiches sell for $2.00 each in all locations. Rent and equipment costs would be $5,050 per month for location A, $5,525 per month for location B, and $5,775 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $8,250. (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 19,250 per month, 21,250 per month, and 22,250 per month, respectively, calculate the profit of the each locations

Answer 1

Answer:

(a) Volume at location A = 16,625

Volume at location B = 17,219

Volume at location C = 17,531

(b) Profit of location A = $2,650

Profit of location B = $2,975

Profit of location C = $3,125

Explanation:

(a) Let the volume at each location be represented by v

Location A

Profit = revenue - total expenditure

8,250 = 2v - (1.2v + 5,050)

8,250 = 2v - 1.2v - 5,050

0.8v = 8,250 + 5,050 = 13,300

v = 13,300/0.8 = 16,625

Location B

Profit = revenue - total expenditure

8,250 = 2v - (1.2v + 5,525)

8,250 = 2v - 1.2v - 5,525

0.8v = 8,250 + 5,525 = 13,775

v = 13,775/0.8 = 17,219 (to the nearest whole number)

Location C

Profit = revenue - total expenditure

8,250 = 2v - (1.2v + 5,775)

8,250 = 2v - 1.2v - 5,775

0.8v = 8,250 + 5,775 = 14,025

v = 14,025/0.8 = 17,531 (to the nearest whole number)

(b) Location A

Profit = sales - total expenditure = 19,250 - (1.2×9,625 + 5,050) = 19,250 - 16,600 = $2,650

Location B

Profit = sales - total expenditure = 21,250 - (1.2×10,625 + 5,525) = 21,250 - 18,275 = $2,975

Location C

Profit = sales - total revenue = 22,250 - (1.2×11,125 + 5,775) = 22,250 - 19,125 = $3,125