Barb Has a Hot-Dog Stand near the Ferry Terminal for Centre

question 40

Essay

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.

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Definitions:

Equipment Held

Assets in the form of machinery or other equipment that a company owns and uses in its operations.

Standby Purposes

Standby purposes involve situations where credit or resources are held in reserve to be utilized in specific circumstances or emergencies.

Actuarial Information

Data and analysis used to evaluate the financial implications of risk and uncertainty, often used in insurance and pensions.

Market Rate

The dominant interest rate in the market for investments with comparable risk and duration.