Refer to Scenario 9.10. In the short run, if the cafe decides to stay open, it will make weekly operating profits of

A) -$2,800.
B) $0.
C) $2,800.
D) $5,400.

Question

Refer to Scenario 9.10. In the short run, if the cafe decides to stay open, it will make weekly operating profits ofA)  -$2,800.B)  $0.C)  $2,800.D)  $5,400.

Champak Agimbola · Accepted Answer

Final Answer : C, Explanation :  The weekly fixed costs include the 10% return on the $1,040,000 investment, which is $104,000 annually or $2,000 weekly (since $104,000 / 52 weeks = $2,000), plus an additional $2,000 in other fixed costs, totaling $4,000 in fixed costs per week. The variable costs are $2,600 weekly ($2,000 in wages + $600 in materials and electricity). The revenue from selling 900 meals at $6 each is $5,400 weekly. The weekly operating profit is calculated as revenue minus variable costs minus fixed costs: $5,400 - $2,600 - $4,000 = -$1,200. However, since the fixed costs already include the investors' expected return, we don't subtract it again. Therefore, the correct calculation for operating profit should only consider revenue and variable costs: $5,400 - $2,600 = $2,800.

Refer to Scenario 9.10. In the short run, if the cafe decides to stay open, it will make weekly operating profits of

A) -$2,800.
B) $0.
C) $2,800.
D) $5,400.

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