A Recently Graduated Business Student Decided to Open a Small

question 81

Multiple Choice

A recently graduated business student decided to open a small Internet café serving a variety of unusual nonalcoholic beverages from around the world. He carefully used all the pricing formulas he learned in school and set a goal to break even the first six months and make a moderate profit for the next six months, at which time he would review his pricing strategies. Within a week after opening, every seat was filled and he had to replenish his beverage orders several times. At his six-month review, he was devastated to find that despite huge sales, he had actually lost money. He realized it wasn't his math that was wrong; he forgot to include monthly expenses such as toilet paper, paper towels, and hand soap in his calculations. These costs should have appeared as __________ in his break-even analysis.

• A)fixed costs
• B)marginal costs
• C)variable costs
• D)overhead costs
• E)sunk costs

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Definitions:

Pizzas

A beloved Italian cuisine item featuring a circular flat dough base covered with tomatoes, cheese, and assorted toppings, cooked rapidly.

Production Possibilities Frontier

A plot that exhibits the ultimate production possibilities for two distinct products, with a basis on inputs that encompass resources and supplementary aspects.

Coats

Outer garments with sleeves that are worn over other clothes for warmth or protection.

Blankets

Textile products designed to provide warmth, typically used on beds but also for wrapping around oneself for comfort.