What would be the incremental annual profit

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Reference no: EM133342197

Case: XYZ Plc is considering extending its opening hours. It commissioned a market research study for €1,000(sunk cost) to assess the likely impact on customer demand. The study concluded that there would be a 5% increase in business from additional sales during the extended opening hours, yielding an annual gross profit of €23,000. However, 25% of these additional sales would simply have moved from the existing opening hours. The staff costs associated with the additional opening hours would be €5,000 per annum. A review of other overheads (€82,000 per annum) indicates that 90% of these costs are fixed, while the balance varies with sales. Based on this information what would be the incremental annual profit (or loss) arising from extending the opening hours?

Reference no: EM133342197

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