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 $1.90 per sandwich. Sandwiches sell for $2.70 each in all locations. Rent and equipment costs would be $5,400 per month for location A, $5,700 per month for location B, and $5,950 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $10,000.

Answer 1

Answer and Explanation:

The computation of the volume necessary for each location is as follows;

a) Volume required for break even at location A

= ($5,400 + $10,000) ÷ ($2.70 - $1.90)

= 19,250 units

Volume required for break even at location B

= ($5,700 + $10,000) ÷ ($2.70 - $1.90)

= 19,625 units

Volume required for break even at location C

= ($5,950 + $10,000) ÷ ($2.70 - $1.90)

= 19,938 units