The following table shows the expansion expenses of a business. Calculate the product growth costs of expansion.
| | |
| :-------------------- | :--------------------------------- |
| **Expansion Expenses** | |
| **Product Growth** | |
| Focus Groups | 40 people at $200/person |
| Inventory Expenses | 20% on $280,000 value |
| New Equipment | $235,000 |
| **Building Growth** | |
| Architect | $14,500 |
| Attorneys | $68,000 |
| Bankers | $115,000 |
Product Growth Costs = $[?]
Answer (1)
Calculate the cost of focus groups: 40 × $200 = $8000 .
Calculate the inventory expenses: 0.20 × $280 , 000 = $56 , 000 .
The cost of new equipment is $235,000.
Sum the costs to find the total product growth costs: $8000 + $56 , 000 + $235 , 000 = $299 , 000 .
Explanation
Understanding the Problem We are asked to calculate the total product growth costs based on the provided table. The product growth costs include focus groups, inventory expenses, and new equipment. We need to calculate the cost for each of these and then sum them up to find the total product growth costs.
Calculating Focus Group Costs First, let's calculate the cost of the focus groups. There are 40 people, and each person costs $200. So the total cost for focus groups is: 40 people × person $200 = $8000
Calculating Inventory Expenses Next, let's calculate the inventory expenses. The inventory value is $280,000, and the expenses are 20% of this value. So the inventory expenses are: 0.20 × $280 , 000 = $56 , 000
Stating New Equipment Costs The cost of the new equipment is directly given as $235,000.
Calculating Total Product Growth Costs Now, let's sum up the costs of the focus groups, inventory expenses, and new equipment to find the total product growth costs: $8000 + $56 , 000 + $235 , 000 = $299 , 000
Final Answer Therefore, the total product growth costs are $299,000.
Examples
Understanding expansion costs is crucial for business planning. For example, if a small bakery wants to expand its product line, it needs to consider costs like focus groups to test new recipes, inventory expenses for new ingredients, and new equipment like ovens. Calculating these costs accurately helps the bakery determine if the expansion is financially viable and how to price the new products. This ensures the bakery can grow sustainably without running into unexpected financial difficulties.
