A grocery retailer is deciding how to use a particular space in the store. One option is
Question:
A grocery retailer is deciding how to use a particular space in the store. One option is to lease a freezer to put in the space and sell a variety of ice cream treats. The ice cream treats should generate annual revenues of \($10,000\) but will reduce revenues from other ice cream sales by \($2,000\) annually. The freezer leases for \($1,000\) per year, the electricity for the freezer should cost \($500\) per year, and the cost of the ice cream treats will be
\($5,000\) per year. The other option is to rent shelving for \($500\) per year and sell artisan bakery goods from a local bakery. The revenues from the bakery items should be \($7,000\) per year and their cost should be \($3,000.\) Selling the artisan bakery goods should not cause any other loss of revenue. Other costs are the same for the two options.
What should the grocery retailer do with the space?
Step by Step Answer:
Management Accounting In A Dynamic Environment
ISBN: 9780415839020
1st Edition
Authors: Cheryl S McWatters, Jerold L Zimmerman