Green Lawn Lawn Care Service provides lawn care services Monday through Friday,

Question

Green Lawn Lawn Care Service provides lawn care services Monday through Friday, but the services are not provided on Saturdays and Sundays, so that employees will have sufficient time for relaxation and to spend with their families. Bill, the owner of Green Lawn realizes that not providing services on Saturdays and Sundays probably affects the profitability of the company. Bill estimates that if the company provided lawn care services on Saturdays and Sundays, the company would have $2,000 of revenue for each of the 52 Saturdays and Sundays during a year. The daily expenses associated with providing services on Saturdays and Sundays would be as follows: Labor $600 Parts $200 Transportation $50 Office wages $100 These amounts do not include any allocation of the monthly rent that the company pays for its office space or any allocation of the depreciation that is incurred with respect to the company’s equipment. What are the opportunity costs that the company incurs because it does not render lawn care services on Saturdays and Sundays?

Explanation / Answer

opportunity cost for saturday and sunday

Revenue = $ 2000

Less:-

Cost of Labour = $ 600

Parts $ 200

Transportation $ 50

office wages $ 100

Total Cost $ 950

net margin = $1050

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