Refer to Scenario 9

question 191

Multiple Choice

Refer to Scenario 9.5 below to answer the question(s) that follow.
SCENARIO 9.5: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal.
-Refer to Scenario 9.5. In the short run, if the restaurant shuts down, it ________ variable costs and ________ revenue.

• A) has; earns
• B) has; earns no
• C) has no; earns
• D) has no; earns no

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Definitions:

Sandwich Shop

A food establishment specializing in the preparation and sale of sandwiches.

Moving Average

A method to smooth out data by creating a continually updated average price or value over a specific period.

Liquor Sales

The commercial activity of selling alcoholic beverages, especially spirits.

Wholesaler

An entity that buys products in bulk from manufacturers and sells them to retailers or other agents.