Problem 8-2 The owner of Genuine Subs, Inc., hopes to expand the present operation by adding one new outlet. She has studied three locations. Each would have the same labor and materials costs (food, serving containers, napkins, etc.) of $2.70 per sandwich. Sandwiches sell for $3.50 each in all locations. Rent and equipment costs would be $5,800 per month for location A, $5,900 per month for location B, and $6,150 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $12,000. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Location Monthly Volume A B C b-1. If expected sales at A, B, and C are 23,000 per month, 26,000 per month, and 25,000 per month, respectively, calculate the profit of the each locations? (Omit the “$” sign in your response.) Location Monthly Profits A $ B $ C $ b-2. Which location would yield the greatest profits?

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Data given in the question

Selling Price (P) = $3.5

Variable Cost (VC) = 2.7 per Unit

Fixed Cost (FC) =

FOR A=5800

For B= $5900

FOR C= $6150

A—Profit Given = $12000

Formula for profit= (P-VC)*Q-FC

Q=(PROFIT+FC)/(P-VC)

So quantity for location A= (12000+5800)/(3.5-2.7)

=22250 UNITS

So quantity for location B= (12000+5900)/(3.5-2.7)

=22375 units

So quantity for location C= (12000+6150)/(3.5-2.7)

=22688 units

B- Formula for profit= (P-VC)Q-FC

So sale for A,B,C location is 23000,26000,25000 respectively. It has been given in the question.

So profit for location A= (3.5-2.7)23000-5800

=$12600

So profit for location B= (3.5-2.7)26000-5900

=$14900

So profit for location C= (3.5-2.7)25000-6150

=$13850

C—Location B yields the greatest profit which is $14900
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