Foodiez Inn Is a Fast-Food Restaurant That Sells Burgers and Hot

question 76

Essay

Foodiez Inn is a fast-food restaurant that sells burgers and hot dogs in a 1980s environment.The fixed operating costs of the company are $10,000 per month.The controlling shareholder,interested in product profitability and pricing,wants all costs allocated to either the burgers or the hot dogs.The following information is provided for the operations of the company:
$$\begin{array} { r r } &\text { Burgers } & \text { Hot Dogs } \\\text { Sales for January } & 4,000 & 2,500 \\\text { Sales for February } & 6,500 & 2,500\end{array}$$ Required:
a.What amount of fixed operating costs is assigned to the burgers and hot dogs when actual sales are used as the allocation base for January? For February?
b.Hot dog sales for January and February remained constant.Did the amount of fixed operating costs allocated to hot dogs also remain constant for January and February? Explain why or why not.Comment on any other observations.

Understand the principles and practices of managing diversity and the political-legal environment impacting businesses.

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Understanding the impact of geological factors on Earth's past, present, and future.

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Definitions:

Externalities

Costs or benefits of a market activity borne by a third party; externalities can be either positive or negative.

Pigovian Taxes

Taxes imposed on activities that generate negative externalities, aiming to correct market inefficiencies and reduce unwanted behaviors.

Regulatory Policies

Rules or guidelines issued by governmental agencies to control or direct economic or social activities.

Negative Externalities

Economic activities that impose a cost on third parties who are not directly involved in the activity, such as pollution.