Reference no: EM132839559

Question - Mr Garp operates a stall in the town's central market and sells shell foods. He normally earns $500 per day computed as follows:

Sales (100 Kilos) $2,000

Less Cost of Sales $800

And operating expense of $700

His operating expense are composed of the daily rental of $400 for the stall, store helper's salary is $50 and miscellaneous expense of $250.

His merchandise, which he buys at an average cost of $8 per kilo, is supplied by fishermen who gather the shell foods in Sabaody Bay. Unfortunately, the long dry season negatively affected his business. Because of the absence of the much-needed rainfall, the whole Sabaody Bay area was contaminated with the so called "red tide" which made the shell foods poisonous and highly dangerous for both human and animal.

When he tried to study the situation and opened his store, he incurred a loss because he sold only 40 kilos of the shell foods. He expects that this trend will continue until such time when the "red tide" problem is over.

He is considering to shutdown his operations temporarily and goes back to business only when the red tide is gone. In case he closes his stall, he will continue to pay rent for the space in order to retain his right over the stall but he will avoid incurring his other operating cost.

Required -

1. Determine income or loss with sales of 40 kilos.

2. Compute the shutdown costs.

3. Should Mr. Blue shut down the operations of his stall?

4. Determine the shutdown point.

5. Determine the shutdown point. in kilos

6. Determine the shutdown point. in dollars