The Owner of Willy's Wonderful Burger Stand Is Concerned Because

question 160

Essay

The owner of Willy's Wonderful Burger Stand is concerned because the stand has been averaging only 3,000 burger sales per month, the stand and staff can make 6,000 burgers per month. The variable cost of each burger (buns, meat, etc.) is $2.50. Monthly fixed costs are (taxes, licenses, space rent and salaries) are $7,500. The owner (Willy Wonderful) believes he could sell 5,000 burgers per month if he cuts the sales price from $5.00 to $4.75 per burger. How much extra profit (above the current level) would he generate if he decreased the sales price?

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Definitions:

Initial Inventory

The amount of stock a company has on hand at the beginning of a financial or inventory period.

Regular Time Cost

The cost associated with normal operating hours or work performed during standard working times, excluding overtime or premium pay rates.

Varying Inventory Levels

Adjusting the amount of stock on hand to meet changing demand conditions or to maximize operational efficiency.

Back Ordering

Refers to the process of accepting and processing orders for currently out-of-stock goods to be fulfilled when the stock is replenished.