Choose a fast food restaurant or chain and talked about the costs that the resta

Question

Choose a fast food restaurant or chain and talked about the costs that the restaurant may have (1 page please), not as company. Just considering the restaurant workplace, include these three things:

1) Name of the business.

2) Name at least three fixed and three variable costs that you think. For each, explain why you think the costs is fixed or variable.

3) Consider the concept of operating risk…which can be summarized as human risk: it is the risk of business operations failing due to human error. Operational risk will change from industry to industry and is an important consideration to make when looking at potential investment decisions. Industries with lower human interaction are likely to have lower operational risk. Does the business you are thinking have a high degree of operating risk? How do you know? How might the company benefit from more operating leverage?

Explanation / Answer

BURGER KING

FIXED COST-

1)ESTABLISHMENT COST-THIS IS A ONE TIME INVESTMENT WHICH INVOLVES A LOT CAPITAL

2)PROPERTY TAX-TO PAID REGULARLY TO THE GOVERNMENT

3)RENT-TO BE PAID MONTHLY OR WEEKLY WHATEVER THE CASE AS THE FIXED AMOUNT HAS TO PAID NO MATTER THE SALES.

VARIABLE COST-

1)EMPLOYEES SALARY- THE EMPLOYEES CAN BE REMOVED OR HIRED AS PER THE MARKET CONDITIONS AND THUS THE COST VARIES

2)COST OF RAW MATERIALS-PURCHASE OF RAW MATERIAL DEPENDS ON THE DEMAND FOR THE FOOD SOLD IN THE RESTAURANT AS LOW DEMAND INCREASES REQUIREMENT

3)OVERHEAD COST-SUCH AS WASTAGE,ELECTRICITY etc ALSO VARIES

THIS INDUSTRY HAS HIGH OPERATING RISK AS IT IS LABOUR INTENSIVE AND THIS CAN REDUCED BY INCREASING THE USAGE OF SOPHITICATED TECHNOLOGY SUCH AS AUTOMATED MACHINES WHICH WILL REDUCE DEPENDENCE ON THESE MACHINES.

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