Refer to the information provided below in Scenario 9.3 to answer the following

Question

Refer to the information provided below in Scenario 9.3 to answer the following questions.SCENARIO 9.3: Investors put up $1,040,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The restaurant charges $8 on average per meal

a.Refer to Scenario 9.3. The normal return to the investors on a weekly basis is

b.Refer to Scenario 9.3. Total variable costs per week are

c.Refer to Scenario 9.3. Total revenue per week is

d.Refer to Scenario 9.3. Total fixed costs per week are

e. Refer to Scenario 9.3. Total cost per week is

f. Refer to Scenario 9.3. The restaurant is making ________ economic profits per week.

positive

breakeven

zero

negative

g.Refer to Scenario 9.3. The operating profit per week of the restaurant is

h.Refer to Scenario 9.3. If the restaurant were to shut down, losses per week would be

i.Refer to Scenario 9.3. Economic profit per week is

positive

breakeven

zero

negative

Explanation / Answer

yearly per week Answer # Fixed interest 104000 2000 a A Fixed other 2000 B Total fixed cost 4000 d A+B=C Variable cost wages 2000 D Variable cost materials 600 E Total Variable cost 2600 b D+E=F Total cost 6600 e C+F=G Revenue 7200 H Economic profit per week 600 i H-G=I Hence restaurant is making positive profit per week f Operating profit per week 4600 H-F=J If restaurant shut down It means no revenue, only fixed cost.. => Loss per week -4000 h K = -C

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