Food Stop, a Fast Food Restaurant, Offers Home Delivery Service

question 37

Multiple Choice

Food Stop, a fast food restaurant, offers home delivery service. The manager of Food Stop decides to upgrade its existing fleet of delivery vehicles to improve the speed of delivery. The estimated cost of the upgrade is set at $100 ,000. If the finance department of Food Stop agrees to a payback period of five years, the upgraded delivery vehicles need to save the restaurant ________ a year for five years.

• A) $200,000
• B) $100,000
• C) $20,000
• D) $40,000

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs.

Price

The amount of money expected, required, or given in payment for something.

TVC

Total Variable Cost (TVC) refers to the sum of all costs that vary with the level of output or production in a company.

Maximizing Profits

The process of optimizing the difference between revenue and costs to achieve the highest possible profit.