Question: Problem 4 Ms. Baker is planning to operate a specialty bagel sandwich kiosk but is undecided about whether to locate in the downtown shopping plaza

Problem 4

Ms. Baker is planning to operate a specialty bagel sandwich kiosk but is undecided about whether to locate in the downtown shopping plaza or in a suburban shopping mall. The data for the two locations are as follows:

Location

Downtown

Suburban

Expected Annual Demand (# Sandwiches)

30,000

25,000

Fixed Cost

(Annual rent, including utilities)

$12,000

$8,000

Average variable cost per sandwich

$2.50

$2.00

Average selling price per sandwich

$4.25

$3.85

  1. Determine the expected annual profit at each location.

  2. Which location would you recommend?

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