Refer to Scenario 9.4 below to answer the question(s) that follow.
SCENARIO 9.4: Sponsors invest $100,000 in a new deli on the promise that they will earn a return of 10% per year on their investment. The deli sells 52,000 sandwiches per year. The deli's fixed costs include the return to investors and $42,000 in other fixed costs. Variable costs consist of wages ($1,000 per week) plus materials, electricity, etc. ($2,000 per week). The deli is open 52 weeks per year.
-Refer to Scenario 9.4. Suppose the average price per sandwich is $5.50. What is the annual profit of the deli?
A) -$22,000
B) $78,000
C) $130,000
D) $244,000

Question

Quizplus · Accepted Answer

The deli's annual revenue is 52,000 sandwiches * $5.50 per sandwich = $286,000. The deli's annual variable costs are $1,000 per week * 52 weeks + $2,000 per week * 52 weeks = $156,000. The deli's annual fixed costs are $10,000 (return to investors) + $42,000 (other fixed costs) = $52,000. The deli's annual profit is $286,000 - $156,000 - $52,000 = $78,000.