The As-You-Like-It Hamburger Shop Is Considering Adding a New Location

question 12

Multiple Choice

The As-You-Like-It Hamburger Shop is considering adding a new location. The investment at each of the four potential sites is the same. The price they can charge for hamburgers is set by the competition in the area. Given the information below, which site is expected to be the most profitable (i.e., net profit) ?
$\begin{array}{lcccr}\text { Factor }&\text { Site A }&\text { Site B }&\text { Site C }&\text { Site D }\\\text { Fixed Cost } & \$ 10,000 & \$ 8,000 & \$ 6,000 & \$ 11,000 \\\text { Variable Cost per Unit } & \$ 0.70 & \$ 0.70 & \$ 0.85 & \$ 0.65 \\\text { Price per Unit } & \$ 1.30 & \$ 1.20 & \$ 1.25 & \$ 1.10 \\\text { Forecast Volume (Units) } & 20,000 & 22,000 & 18,000 & 24,000\end{array}$

• A) Site A
• B) Site B
• C) Site C
• D) Site D

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Definitions:

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from total sales revenue.

Ratio

A quantitative relationship between two numbers, often used in financial analysis to assess performance, financial health, and operational efficiency.

Income Statement

A financial report that shows a company's revenues and expenses over a specified period of time, resulting in net profit or loss.

Vertical Analysis

A technique in analyzing financial statements, where each item in the primary categories of assets, liabilities, and equity on a balance sheet is expressed as a ratio of the overall category total.