"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.
- Consider the table below:
|
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
|
What is the Accounting Cost of operating this business? What is the Economic Cost? Why do they differ?