50.1K

Verified Solution

Link Copied!

Relevant Information; breakeven; targeted profit; price; uncertainties

Francesca would like to lease a coffee cart in Melbourne. The lease is $800 per month, and a city license to sell food and beverages costs $20 per month. The lessor of the stand has shown Francesca records indicating that gross revenues average $32 per hour. The out of pocket costs for ingredients are generally about 40 percent of gross revenues. Last year Francesca paid 25 percent of her income in government taxes.

Francesca pays $1000 per month for her apartment. She could store the cart overnight in the apartment's garage, which is currently unused. Real estate developers in Melbourne estimate that about 20 percent of the cost of a residential building is for the garage.

At present, Francesca is earning $2400 per month as a ski instructor for one of the big ski areas. In the summer, she earns about the same income as a kayaking instructor.

a)List each piece of quantitative information in this problem. For each item, indicate whether it is relevant to Francesca's decision and explain why.

b)If Francesca leases the cart and works 30 days in a month, how many hours will she have to work each day, on average, to be at least as well off financially as she is in her current job?

Answer & Explanation Solved by verified expert

See Answer