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Lecture

Additional Recommended Question.pdf

2 Pages
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Department
Accounting
Course Code
ACCTG424
Professor
Trish Stringer

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Additional Recommended Question: Uncertainty Voltaire, a renowned pastry chef employed at a four-star hotel, has decided to open his own exclusive pastry shop. He has $100,000 to invest and the information he has obtained is as follows:  There is a 55% probability the market size in the area will be 600,000 pastries per year and a 45% chance it will be 450,000 pastries per year.  Price per pastry is assumed to be $4.00 and this is the basis for predicting Voltaire’s market share.  Variable costs are $2.60 per pastry. The market share Voltaire will capture depends on where he locates. There are two possibilities:  Location A costs $38,000 annual rent where Voltaire will capture 30% of the pastry market (his market share). Fixed costs excluding rent are estimated at $90,000 per year.  Location B costs $12,000 annual rent where Voltaire will capture 22% of the pastry market (his market share). Fixed costs excluding rent are estimated at $54,000 per year. Selling price per unit $120 $200 Direct materials $30 $40 Direct labour
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