Class Notes (839,092)
Accounting (108)
ACCTG424 (12)
Lecture

2 Pages
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Department
Accounting
Course Code
ACCTG424
Professor
Trish Stringer

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Description
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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