Refer to Scenario 9.5. In the short run, if the restaurant decides to stay open, it will make operating profits of

A) -$1,100.
B) $0.
C) $1,100.
D) $2,700.

Question

Refer to Scenario 9.5. In the short run, if the restaurant decides to stay open, it will make operating profits ofA)  -$1,100.B)  $0.C)  $1,100.D)  $2,700.

Priscilla Chiangong · Accepted Answer

Final Answer : C, Explanation :  To calculate the operating profits, first determine the total revenue, then subtract the total costs (fixed and variable). Total revenue is 900 meals/week * $3/meal = $2,700/week. Fixed costs include the investors' return (10% of $520,000 = $52,000/year or $1,000/week) plus $1,000/week in other fixed costs, totaling $2,000/week. Variable costs are $1,000/week for wages and $600/week for materials, totaling $1,600/week. Total costs are $2,000 (fixed) + $1,600 (variable) = $3,600/week. Operating profits are revenue - total costs = $2,700 - $3,600 = -$900. However, since none of the provided options match this calculation, it appears there may have been an error in the calculation or in the interpretation of the provided options. Given the options, the closest logical answer based on the scenario's details would be to re-evaluate the calculation or assumptions.

Refer to Scenario 9.5. In the short run, if the restaurant decides to stay open, it will make operating profits of

A) -$1,100.
B) $0.
C) $1,100.
D) $2,700.

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