Mini case 3.58 - Cost Function, Operating Leverage, Keeping or Dropping a Business

The university's Wildcat Lair caters to students and serves sandwiches and beverages. It has been reporting losses in past months. In July, for example, the loss was $5,000:

The Lair purchases prepared food directly from University Food Services. This charge varies proportionately with the number and kind of meals served. Personnel paid by the Lair serve the food, tend the cash register, bus, and clean tables, and wash dishes. The staffing levels rarely change; the existing staff can usually handle daily fluctuations in volume. Administrative costs are primarily the salaries of the manager and her office staff. Because the university provides support services for the Lair, such as payroll, human resources, and other administrative support, the university charges a surcharge of 10% of its revenues. Utility costs are the costs of cooling, heating, and lighting during its regular operating hours.

Suppose you are the manager of the Wildcat Lair. Write a memo to persuade the university management to keep the club open.Suppose you are the manager of the Wildcat Lair. Write a memo to persuade the university management to keep the club open..