Ariel LeBec, of Ariel’s Sandwich Shoppe, sells Po’ Boy sandwiches and soda from

Question

Ariel LeBec, of Ariel’s Sandwich Shoppe, sells Po’ Boy sandwiches and soda from a sidewalk cart in a popular park near her home in New Orleans. She sets up her rented cart in the summers to raise money for college. Last month she sold $6,000 worth of product (sandwiches and sodas) to 300 customers. She spent $1,200 on the sandwich ingredients, wrapping materials, and sodas. Her monthly costs are the following: Utilities = $100, Salary =$2,000, Advertising = $150, Insurance = $50, Interest = $0, Rent = $500, and Depreciation = $0. What is Ariel’s EOU?

Explanation / Answer

To calculate the economics of one unit of sale, subtract the variable expenses for a unit from the selling price for the unit.

Rents, Depreciation, insurance, interst, utilities, monthly salary and advertising, all are fixed expenses to a business.

Variable expenses include ingredient cost.

Selling price for a unit= 6000/300 = $20

Variable expenses per unit=1200/300= $4

Economics of one unit= 20-4= $16

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