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Week 3 Discussion Attachment


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“Production Costs” Please respond to one of the following:

  • You are the owner of a fast-food restaurant. Given a new item that you recently advertised, you experience additional demand for your business that you do not want to ignore. Identify your fixed and variable costs at your fast-food restaurant, and explain the changes to each of these costs given the increased demand.
  • What is the accounting cost of operating the business described by the information in the table below? What is the economic cost? Why do the two cost estimates differ?
Economic Versus Accounting Costs
Item: Cost
Total annual labor cost (the business owner does not draw a salary)$160,000.00
Total annual cost of materials used in production$250,000.00
Annual expenditure on rent, utilities, taxes, insurance, and misc. expenses$90,000.00
The business owners’ previous annual salary when he worked for someone else$85,000.00
The business owner’s annual interest income before sinking all of his funds into this business$15,000.00
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