Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Two business students are considering opening a business selling hamburgers next summer. The students view this as an alternative to taking summer employment with a

Two business students are considering opening a business selling hamburgers next summer. The students view this as an alternative to taking summer employment with a local firm where they would each earn Br 3,000 during the three-month summer period. It would cost Br 2,000 to obtain a license to operate their stand, Br 1,000 per month to rent the stand with the necessary equipment and Br 100 per month for insurance. Petrol costs are estimated at Br 10 per day. Hamburger meat can be bought for Br 4.00 per kilo and buns cost Br 1.20 per dozen. The burgers would sell in 125-gram patties for Br 1.50 each.

a)Find the accounting cost function for the proposed business.

b)Find the economic cost function for the proposed business.

c)Calculate the level of output where the business would make normal profit.

d)Cheese slices for the burgers can be bought for Br 2.40 for twenty slices and it is estimated that 30 per cent of customers would ask for the cheeseburgers, with these selling for Br 1.95. Calculate the effect of this on the output necessary to make normal profit.

If the students can sell 150 burgers a day, 30 per cent with cheese, estimate the economic profit they would make. Advise them whether they should enter the business.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting in an Economic Context

Authors: Jamie Pratt

8th Edition

9781118139424, 9781118139431, 470635290, 1118139429, 1118139437, 978-0470635292

More Books

Students also viewed these Accounting questions

Question

In what situation does gravity do work on an object?

Answered: 1 week ago