"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:
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Economic Versus Accounting Costs
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Item:
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Cost
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Total annual labor cost (the business owner does not draw a salary)
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$160,000.00
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Total annual cost of materials used in production
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$250,000.00
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Annual expenditure on rent, utilities, taxes, insurance, and misc. expenses
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$90,000.00
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The business owners' previous annual salary when he worked for someone else
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$85,000.00
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The business owner's annual interest income before sinking all of his funds into this business
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$15,000.00
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What is the Accounting Cost of operating this business? What is the Economic Cost? Why do they differ?