Question
A company is planning to expand and wants to open a burger restaurant. We have following information about the cost and revenue projection over the
A company is planning to expand and wants to open a burger restaurant. We have following information about the cost and revenue projection over the next five years.
The total revenue for the first year of operations is estimated to be $900526.
Revenues are to be projected over 5 years of operations.
Direct costs include purchases of food and beverages and wages. For the first year, purchases of food and beverages and wages are estimated to account for 36.7% and 30.2% of the total annual revenue . Indirect costs include rent, utilities, marketing, administration, and other costs.The estimated total rent cost in the first year is $32,890: For Utilities: Fast food restaurants spend 2.5% of their revenues on services such as gas, electricity and the internet . For Marketing: The projected expenditures on advertising represent 2.8% of total revenue. For Administration: We are planning to hire one restaurant manager at the average hourly rate of CAD$35, and the expected total working hours per week for this position is 48 hours. We use 52 weeks per year. Other Costs: Organizations in the fast-food industry also incur various other expenses, which include legal and accounting fees, administrative expenses, insurance and repairs and maintenance, and these costs add up to 1.5% of total revenue.
Based on the given mandates on revenues and costs of operations, compute the total direct and indirect costs of operations for the first year.
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