Maria goes to visit a national park for a beautiful day of serenity, hiking, and mental health. She

was told of a small fish shack situated at the edge of the park serving amazing walleye fish.

They normally sell 400 sandwiches per day. Before embarking on her day she stops in to see

what all the fuss is about. Though she paid $18.75 for her sandwich, she still thinks that the

raves are merited; Maria loved the sandwich, it was delicious. She also understands that

walleye fillets are thinker and grill better than most freshwater fish. Also, she does not have

much opportunity to eat walleye in the city.

The scenery made her sandwich taste even better. As she was taking in the magnificence of her

surroundings: forest, birds, sky, sunshine; she noticed a boat in the big lake. It was docking by

the fish shack. She guessed that the fish she had just eaten came in byway of this boat from

this very lake.

Maria noted how interesting it was. She asked the owners of the shack what process was

required for them to fish in the lake. They told her that, because they are residents of the area,

they purchased a seasonal permit which resulted in an amortized value of $200/month. The

permit did not have restrictions on the size of catch, only on the type of fish, boat and nets used;

and that this boat satisfied those requirements. They also said that they caught about 6000 fish

per month which would normally have a market value of $126,000

Each fish produces two fillets. Each sandwich had one fillet. Bread and condiments totaled

$2.45 per sandwich. Other operating costs totaled $2,300 per month. Fish shack staff expense

is $8,200 per month. (75% of which is directly related to the cost of the sandwich.) $300 a

month is spent on advertising. The business rents the shack from its owner at $500 per month

including utilities. .

The neighbouring community had recently started speaking out against the fish shack, because

they found fish stocks too low for others to fish by the end of the season due to the catch taken

by the fish shack. Neighbouring communities are also speaking out about the mess that is being

created by the fish shack dumping their waste in the middle of the lake. Some of it washes up

on shore kilometers away, and some of it damages the natural ecosystem. If they were to

dispose of the waste of sandwich production safely, the disposal market cost would be $2,500

per month

Question:

1. Please prepare an income statement, your choice of format, for the fish shack for a

month (30 operating days) during its season. Use the revenues and expenses actually

generated. A: 5 marks

2. With the information from question #1, please identify the unit cost to the fish shack per

sandwich and its profit per sandwich. A: 3 marks

3. Please prepare an income statement, your choice of format, for the fish shack for a

month (30 operating days) that includes the market costs for externalities. Remember, to

exclude the permit cost. A: 5 marks

4. Using this information from question #3, please identify the unit cost to the fish shack per

sandwich and its profit per sandwich. A: 3 marks

pur-new-sol

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