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 £3,000 during the three-month summer period. It would cost £2,000 to obtain a licence to operate their stand, £1,000 per month to rent the stand with the necessary equipment and £100 per month for insurance. Petrol costs are estimated at £10 per day. Hamburger meat can be bought for £4.00 per kilo and buns (cuolall jus) cost £1.20 per dozen (10 pieces). The burgers would sell in 125 gram patties for £1.50 each. a. Find the accounting cost for the proposed business if they sell 100 burgers a day? b. Find the economic cost function for the proposed business if they sell 100 burgers a day? c. If the students can sell 100 burgers a day, What is the economic profit they would make in the three months (91 days). Advise them whether they should enter the business or not?
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 £3,000 during the three-month summer period. It would cost £2,000 to obtain a licence to operate their stand, £1,000 per month to rent the stand with the necessary equipment and £100 per month for insurance. Petrol costs are estimated at £10 per day. Hamburger meat can be bought for £4.00 per kilo and buns (cuolall jus) cost £1.20 per dozen (10 pieces). The burgers would sell in 125 gram patties for £1.50 each. a. Find the accounting cost for the proposed business if they sell 100 burgers a day? b. Find the economic cost function for the proposed business if they sell 100 burgers a day? c. If the students can sell 100 burgers a day, What is the economic profit they would make in the three months (91 days). Advise them whether they should enter the business or not?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A3
Transcribed Image Text: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 £3,000
during the three-month summer period. It would cost £2,000 to obtain a
licence to operate their stand, £1,000 per month to rent the stand with the
necessary equipment and £100 per month for insurance. Petrol costs are
estimated at £10 per day. Hamburger meat can be bought for £4.00 per kilo
and buns (cuolall jus) cost £1.20 per dozen (10 pieces). The burgers would
sell in 125 gram patties for £1.50 each.
a. Find the accounting cost for the proposed business if they sell 100 burgers
a day?
b. Find the economic cost function for the proposed business if they sell 100
burgers a day?
c. If the students can sell 100 burgers a day, What is the economic profit they
would make in the three months (91 days). Advise them whether they should
enter the business or not?
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