The owner of Genuine Subs, Inc., hopes to expand the present operation by adding

Question

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 $1.60 cents per sandwich. Sandwiches sell for $2.71 each in all locations. Rent and equipment costs would be $5,060 per month for location A, $5,560 per month for location B, and $5,760 per month for location C.

Determine the volume necessary at each location to realize a monthly profit of $9,000. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

If expected sales at A, B, and C are 20,700 per month, 22,400 per month, and 22,900 per month, respectively, calculate the profit of the each locations? (Omit the "$" sign in your response.)

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 $1.60 cents per sandwich. Sandwiches sell for $2.71 each in all locations. Rent and equipment costs would be $5,060 per month for location A, $5,560 per month for location B, and $5,760 per month for location C.

Explanation / Answer

for location A:

use the equation X*gross profit per sub - fixed costs=11,000

so X*(2.57-1.54) - 5030=11000

solving for X=15,564 subs

other locations use the same formula, substituting in the new fixed costs. To find the most profitable location, insert # of subs made for X, put in the corresponding rent for that location, and replace the 11,000 with X to find the gross profit

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