Question
Frank is 6 months into the business and believes he is doing very well. He started his business on February 1, at a stand in
Frank is 6 months into the business and believes he is doing very well. He started his business on February 1, at a stand in South Beach (Miami). Hes not an accountant, but what he knows about the financial information is as follows:
Month | Sales (quantity) |
February | 1,500 |
March | 1,800 |
April | 3,000 |
May | 2,000 |
June | 1,000 |
July | 750 |
He has great Yelp reviews and believes that the changes in quantity of sales are primarily linked to seasonality of when people visit South Beach (April being particularly busy due to Spring Break). Frank only sells hotdogs, and sells them for $6. His costs are $2. (Note: This is maybe not the most realistic reflection of how a business runs; however, for purposes of understanding the accounting concepts, were going to use a simple example).
By Franks calculations, he has made 10,050 (quantity) of total sales and believes his profit is $40,200 (10,050 sales x $4 profit margin ($6 selling price less $2 cost). He believes the next 6 months would average out much like the first, and hes comfortable making $80,400 per year.
In this weeks discussion, please address whether Frank is considering everything, based on the list of assets we discussed in Week 4 and the costs associated with them.
In your initial post, share one additional unique cost. And a brief rationale of why it needs to be considered in Franks overall financial scenario.
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