Question

A cyber cafe currently operating from 11am to 8pm daily. The supervisor is trying to
determine whether they should extend the closing time from 8pm to 12 midnight. He
estimates that the revenue will increase by RM250 per hour if he extends hours. However,
he will have to pay a part-time worker for 4 additional hours at RM20/hour.
Additional miscellaneous costs of RM500 will be incurred and utility costs will be increased
by RM15 per hour.

a) Should they extend the hours?
b) Based on the above calculation, should they extend the operation hour for
another 3 hours until 3 a.m? The similar incremental cost will occur.

Answer 1

a.)	Extend upto 12 Midnight	Amount $
	Incremental Revenue	1,000	(250 x 4 )
	Less: Incremental Costs
	Part Time woker	80	(20 x 4 )
	Miscellaneous costs	500
	Utility Costs	60	( 15 x 4 )
	Incremental Net Income	360
	Yes, because it will have incremental net income of $360.
b.)	Another 3 Hours
	Incremental Revenue	750	(250 x 3)
	Less: Incremental Costs
	Part Time woker	60	(20 x 3 )
	Miscellaneous costs	500
	Utility Costs	45	( 15 x 3 )
	Incremental Net Income	145
	Yes, still they will have Incremental Net income of $ 145.