A Local Business Owner Is Considering Adding Another Employee to His

question 185

Short Answer

A local business owner is considering adding another employee to his staff in an effort to increase the number of hours that the store is open per day. If the employee will cost the owner $4,000 per month and the store takes in $50/hour in revenue with variable costs of $15/hour, how many hours must the new employee work for the owner to break even?

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Definitions:

Variable Cost

Costs that vary in direct relation to a business's operations, like expenses for raw materials or manufacturing supplies.

Activity Decreases

Reductions in the volume or intensity of activities, often leading to lower costs or changes in operational strategies.

Cost Estimation

The process of predicting the amount of resources, especially money, time, and labor, necessary to complete a project or produce a product.

Strong Correlation

A statistical relationship between two variables where a change in one is strongly associated with a change in the other.