The following table shows the expansion expenses of a business. Calculate the product growth costs of expansion.
| | |
| :-------------------- | :-------------------------------- |
| **Expansion Expenses**| |
| **Product Growth** | |
| Focus Groups | 50 people at $195/person |
| Inventory Expenses | 30% on $230,000 value |
| New Equipment | $215,000 |
| **Building Growth** | |
| Architect | $15,500 |
| Attorneys | $60,000 |
| Bankers | $115,000 |
Product Growth Costs = $ [?]
Answer (1)
Calculate the cost of Focus Groups: 50 × $195 = $9 , 750 .
Calculate the Inventory Expenses: 0.30 × $230 , 000 = $69 , 000 .
The cost of New Equipment is $215,000.
Add all the costs to find the total Product Growth Costs: $9 , 750 + $69 , 000 + $215 , 000 = $293 , 750 .
Explanation
Understanding the Problem We are given a table of expansion expenses for a business, divided into Product Growth and Building Growth. We need to calculate the total Product Growth Costs, which include Focus Groups, Inventory Expenses, and New Equipment.
Calculating Focus Groups Cost First, let's calculate the cost of the Focus Groups. We have 50 people at $195 per person. So, the total cost is: 50 × 195 = 9750
Calculating Inventory Expenses Next, we calculate the Inventory Expenses, which are 30% of $230,000. So, the expenses are: 0.30 × 230000 = 69000
Stating New Equipment Cost The cost of New Equipment is given as $215,000.
Calculating Total Product Growth Costs Now, we add up all the Product Growth Costs: Focus Groups, Inventory Expenses, and New Equipment. 9750 + 69000 + 215000 = 293750
Final Answer Therefore, the total Product Growth Costs are $293,750.
Examples
Understanding business expenses and calculating growth costs is crucial for financial planning. For example, a small bakery wants to expand its product line. They need to consider the cost of focus groups to test new recipes, inventory expenses for new ingredients, and the cost of new equipment like ovens. By accurately calculating these product growth costs, the bakery can determine if the expansion is financially viable and make informed decisions about pricing and budgeting.
