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 $2.40 per sandwich. Sandwiches sell for $3.20 each in all locations

Rent and equipment costs would be $5,650 per month for location A, $5,825 per month for location B, and $6,075 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $11,250. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Location Monthly Volume A B C b-1. If expected sales at A, B, and C are 25,250 per month, 22,250 per month, and 24,250 per month, respectively, calculate the profit of the each locations? (Omit the "$" sign in your response.) Location Monthly Profits A $ B $ C $ b-2. Which location would yield the greatest profits?

(profit + fixed) / contribution ratio = target sales

Contribution Margin per unit 3.20 - 2.40 = 0.80

A (11,250 + 5,650) / 0.80 = 21,125 units

B (11,250 + 5,825) / 0.80 = 21,344 units

C (11,250 + 6,075) / 0.80 = 21,656 units

Operating Income for each location:

A 25,250 x $0.8 - $5,650 = $ 14,550

B 22,250 x $0.8 - $5,825 = $ 11,975

C 24,250 x $0.8 - $6,075 = $ 13,325

ebrightosagie ebrightosagie · Answer 2 · 2020-04-24T05:47:30+02:00

Answer: shop A would yield the greatest profit $14,550

Explanation: Complete question

of $2.40 per sandwich. Sandwiches sell for $3.20 each in all locations. Rent and equipment costs would be $5,650 per month for location A, $5,825 per month for location B, and $6,075 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $11,250. Round your answer Location Monthly Volume A B C b-1. If expected sales at A, B, and C are 25,250 per month, 22,250 per month, and 24,250 per month, respectively, calculate the profit of the each locations?

Solution

Volume needed to realize profit of $11,250

A. ( $5650 + $11,250) / ( $3.20 - 2.40)

= $16900 / 0.8

= 21,125

B. ( $5825 + $11,250) / ( $3.20 - 2.40)

= $17075/0.8

= $21,343.75

C. ( $6075 + $11,250) / ( $3.20 - 2.40)

= $17325 / 0.8

= $21,656.25

Profit of each location

A. $25250 * ( 3.20 - 2.40 ) - 5650

= $14,550

B. $22250 * ( 3.20 - 2.40 ) - 5825

= $11,975

C. $24250 * ( 3.20 - 2.40 ) - 6075

= $13,325