Problem 8-2 The owner of Genuine Subs, Inc., hopes to expand the present operati
ID: 347941 • Letter: P
Question
Problem 8-2 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 $1.10 per sandwich. Sandwiches sell for $1.90 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 $5,750 per month for location C a. Determine the volume necessary at each location to realize a monthly profit of $8,000. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Location Monthly Volume b-1. If expected sales at A, B, and C are 19,000 per month, 21,000 per month, and 22,000 per month, respectively, calculate the profit of the each locations? (Omit the "$" sign in your response.) Location nthly ProfitsExplanation / Answer
For each location Variable cost (VC) = $1.10
For each location selling price(SP) = $1.90
Fixed cost (FC) for each location are
a) If profit (P) = $8000,let volume of output = Q
For location A:
P = Q(SP - VC) - FC
=> 8000 = Q(1.90-1.10) - 5000
=> 8000 = 0.8Q - 5000
=> 0.8Q = 8000+5000
=> 0.8Q = 13000
=> Q = 13000/0.8
=> Q = 16250
For location B:
P = Q(SP - VC) - FC
=> 8000 = Q(1.90-1.10)-5500
=> 8000= 0.8Q - 5500
=> 0.8Q = 8000+5500
=> 0.8Q = 13500
=> Q = 13500/0.8
=> Q = 16875
For location C:
P =Q(SP - VC) - FC
=> 8000 = Q(1.90-1.10)-5750
=> 8000 = 0.8Q - 5750
=> 0.8Q = 8000+5750
=> 0.8Q = 13750
=> Q = 13750/0.8
=> Q = 17187.5
b) If the volume of output (Q) for A = 19000,B=21000 and C=22000
Profit for location A = Q(SP - VC) - FC
= 19000(1.90-1.10) - 5000
= (19000 x 0.8)-5000
= 15200-5000
= $10200
Profit for location B = Q(SP - VC) - FC
= 21000(1.90-1.10)-5500
= (21000 x 0.8)-5500
= 16800-5500
= $11300
Profit for location C = Q(SP - VC) - FC
= 22000(1.90-1.10)-5750
= (22000 x 0.8)-5750
= 17600-5750
= $11850