A Recently Graduated Business Student Decided to Open a Small

question 81

Multiple Choice

A recently graduated business student decided to open a small Internet café serving a variety of unusual nonalcoholic beverages from around the world. He carefully used all the pricing formulas he learned in school and set a goal to break even the first six months and make a moderate profit for the next six months, at which time he would review his pricing strategies. Within a week after opening, every seat was filled and he had to replenish his beverage orders several times. At his six-month review, he was devastated to find that despite huge sales, he had actually lost money. He realized it wasn't his math that was wrong; he forgot to include monthly expenses such as toilet paper, paper towels, and hand soap in his calculations. These costs should have appeared as __________ in his break-even analysis.

• A)fixed costs
• B)marginal costs
• C)variable costs
• D)overhead costs
• E)sunk costs

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Definitions:

Actual

Actual refers to something existing in reality or fact, not merely potential or hypothetical, but truly present or occurring.

Social

Relating to society, the interactions amongst individuals and groups, and the structure of communities and relationships.

Mental Aptitude

The capacity of an individual to learn, understand, and make judgments or have opinions based on reason.

Self-concept

An individual's perception of self, including attributes, who and what the self is, and how the self relates to others and the world.