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majarm majarm
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5 years ago
Barb has a hot-dog stand near the ferry terminal for Centre Island. She pays $500 per month as rent and $3000 per month in wages for the hired help. Variable costs per hot dog come out to be $1.30 and she sells each hotdog for $3.00. In summer months, she is able to sell 4500 hotdogs in a month. Recently, another hot dog vendor opened his stand across the street. To attract and retain her customers, she added a free soda can which increased her variable costs by 20 cents. To make things worse, the rent was also increased by 15%. What is the change in her monthly net income due to these recent changes. Assume that the monthly sale figures remain at 4500 units.
Textbook 

Contemporary Business Mathematics with Canadian Applications


Edition: 11th
Authors:
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AxyAxy
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5 years ago
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OLD numbers  X = 4500;  VC = 1.30; FC = 500 + 3000 = 3500;  SP= 3.00
(Selling price × Volume) - Fixed cost - (Variable cost per unit × Volume) = Profit
(3 × 4500) - 3500 - (1.30 × 4500) = PFT
4150 = PFT

NEW numbers  X = 4500; VC = 1.30 + 0.20 = 1.50; FC = 1.15(500) + 3000 = 3575;  SP = 3.00
(Selling price × Volume) - Fixed cost - (Variable cost per unit × Volume) = Profit
(3 × 4500) - 3575 - (1.50 × 4500) = PFT
3175 = PFT
Monthly profit is reduced by = 4150 - 3175 = 975

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Barb has a hot-dog stand near the ferry terminal for Centre Island. She pays $500 per month as rent and $3000 per month in wages for the hired help. Variable costs per hot dog come out to be $1.30 and she sells each hotdog for $3.00. In summer months, she is able to sell 4500 hotdogs in a month. To increase her sales, she added a free soda can which increased her variable costs by 20 cents. However, it increased her monthly sales to 5000 units. What is the change in her monthly net income due to these recent changes

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