You are the owner manager of a food truck that sells burgers and soft drinks. You believe the business is profitable and you want to know more about the relationship between costs, profit, and volume of the business. Your accountant has prepared the following analysis for you:

Current weekly sales$6,000

Average selling price per burger$10

Average variable costs per burger$6

Average fixed costs per week$2,000

Breakeven sales of burgers per week500 burgers

Margin of safety16.67%

Required

Section One: Cost Behaviouri)What types of things would be included in variable costs?ii)What types of things would be included in fixed costs?

Section Two: Breakeven Analysis i)What does breakeven mean?ii)How has the accountant calculated the breakeven units? iii)How would you calculate the breakeven amount of dollar sales? iv)Can we prove that the calculation is correct?

Section Three: Margin of Safety i)What does margin of safety mean? ii)How would you use margin of safety to interpret operating risk for the business?

Section Four: What-if Analysisi)How much profit is the business currently earning per week?ii)How does the breakeven change if variable costs per burger increase? Or fixed costs increase? Or selling price reduces?

Section Five: Make or Buy DecisionSuppose that a supplier has approached you and offered to supply burgers to the business. How can you decide whether to make or buy burgers? Identify any qualitative concerns if you decide to buy burgers from the supplier.