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 $1.60 per sandwich. Sandwiches sell for $2.40 each in all locations.

Rent and equipment costs would be $5,250 per month for location A, $5,625 per month for location B, and $5,875 per month for location C.
a. Determine the volume necessary at each location to realize a monthly profit of $9,250. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

Answer 1

Location A: 18,125.00

Location B: 18,593.75

Location C: 18,906.25

Step-by-step explanation:

We solve for the contribution per sandwich:

2.40 selling price - 1.60 variable cost = 0.80 contribution per sandwich

We now, divide the fixed cost and mtarget profit over the contribution to get the amount of sandwhich needed to achieve it.

`(Fixed\:Cost + target \: profit)/(Contribution \:Margin) = Sales\: to\: Profit_(units)`

Location A:

`(5,250 + 9,250)/(0.80) = Break\: Even\: Point_(units)`

18,125

Location B:

`(5,625 + 9,250)/(0.80) = Break\: Even\: Point_(units)`

18593,75

Location C:

`(5,875 + 9,250)/(0.80) = Break\: Even\: Point_(units)`

18906,25