Refer to Scenario 9

question 258

Multiple Choice

Refer to Scenario 9.3 below to answer the question(s) that follow.
SCENARIO 9.3: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $5 on average per meal.
-Refer to Scenario 9.3. Total fixed costs per week are

• A) $1,000.
• B) $2,000.
• C) $3,000.
• D) $4,500.

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Definitions:

Return on Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Total Liabilities

The sum of all debts and financial obligations a company owes to outside parties.

Total Assets

The sum of all resources owned by a company or an individual, valued in monetary terms, which includes tangible and intangible items.

Net Income

The total earnings of a company after subtracting all expenses and taxes from the total revenue.