Module 2 Discussion: Role of an Entrepreneur
For the Module 2 Discussion, you will assume the role of an entrepreneur. You will create a fictional organization and consider some costing concepts as you create it.
First, compose a full paragraph that describes the organization. Be sure to include the name of your company, the product(s) or service(s) that it provides, and who your intended customer base would be. Think strategically about what you can offer that a customer base would see as valuable, and what basic business model would help you to be most profitable.
Once you have outlined the company and its goals, please consider and answer the following questions:
- Identify at least one fixed and one variable cost you will have in producing your product(s) or service(s).
- Identify at least one potential sunk cost.
- Identify a potentially relevant cost decision you would have to make and explain which aspects of the decision might be relevant and which ones would not be relevant.
- Explain how opportunity costs could apply to one or more of your products and/or services.
Your initial posting should be between 200 to 400 words and use a minimum of two sources (one of which may be the textbook). Cite your sources using APA format (a tutorial is provided in the class tutorials section of the course).
Solution
Module 2 Discussion
The organization I will be enterprising in is Rodrick’s food plaza. The business will deal with providing fast food services round the clock. The main products would be:
Burgers, Sandwiches, Salads, Subways, Hotdogs, Tacos, Wraps, Noodles, Shakes and Juices, Brownie & Donuts and many more items. The main target customers will be people from the age group of 15-35 years comprising mainly college students, hostel residents, and teenagers. The business model I will be using here will be a flow chart from acquiring customer’s orders (offline or online), providing fast deliveries, fast billing procedures to clearing of tables. It has to be very efficiently managed for the smooth running of the operations.
1. Fixed costs are the costs that remain fixed despite the increase or decrease in sales. The main fixed cost here is the rent of the place of operation. However, Variable costs are just vice versa. They change along with an increase or decrease in the sales of the products or services of an organization. One of the main variable costs here is the cost of raw materials which will definitely increase with an increase in the sales of different items as mentioned above.
2. The potential sunk cost in this business would be the advertising costs or the costs incurred in marketing the brand Rodrick’s Food Plaza. These are classified under the potential sunk costs since once spent, these cannot be recovered back in the future (Choi et al,2020, p.1035).
3. Relevant cost decisions are the costs that can be avoided but they are made only when the business is taking some specific decisions. It can be hiring a Pro chef when a bulk order is received. The extra charges to be paid to the chef for his service will have relevance while the other costs that have already been incurred like the packaging costs etc., might not be relevant.
4. Opportunity costs are basically the benefits that are sacrificed for the reason of selecting one opportunity over another. Here, the opportunity costs will be the orders received on the online food delivery application and the counter orders that were sacrificed due to the fulfillment of the online orders received and vice versa (Liguori & Winkler,2020, p.348).
References:
Choi, T. M., Guo, S., Liu, N., & Shi, X. (2020). Optimal pricing in on-demand-service-platform operations with hired agents and risk-sensitive customers in the blockchain era. European Journal of Operational Research, 284(3), 1031-1042.
Liguori, E., & Winkler, C. (2020). From offline to online: Challenges and opportunities for entrepreneurship education following the COVID-19 pandemic. Entrepreneurship Education and Pedagogy, 3(4), 346-351.
