Week 3 Discussion
“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|
|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|