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The Case:

 

SUBWAY is a prominent American fast food restaurant franchise that mainly sells submarine sandwiches and salads. It was established in 1965 in Bridgeport (United States). It has 42,859 restaurants in 108 countries and territories as of October 23, 2014. It has stores not only in Pakistan but also in United States. Its international headquarters is in Milford, Connecticut. SUBWAY restaurants have massive business at lunchtime, but it was observed that the meals which were offered on promotional price at the time of breakfast and dinner made substantial profit contribution.

 

Requirement:

 

Does the success of SUBWAY restaurants in this regard reflect an effective application of the marginal profit concept or the incremental profit concept? Explain.


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Replies to This Discussion

idea bus itna sa hai koi new product to company add nai ker rahi kuch free to sath dy nahin rahi agar aisa kuch hota to marginal ana tha ho kiya raha hai yeh gdb main mention hai so just focus on it read it carefully u'll got the right answer

best of luck

GDB ECO 404

page 6 of handout -->A marginal relation is the change in the dependent variable caused by a one-unit change in an
independent variable. For example, marginal revenue is the change in total revenue associated
with a one-unit change in output; marginal cost is the change in total cost following a one-unit
change in output; and marginal profit is the change in total profit due to a one-unit change in
output.

I think answer is incremental not marginal.
Read this from http://www.smallbusiness.chron.com
Incremental earnings provide an indication of a company's growth rate based on its investment decisions. Incremental earnings are best defined as the amount that a firm's earnings rise as a result of those investments, such as new products to sell.
Example
A technology company that decides to conduct incremental analysis to determine the potential revenue from the completion of a new product will first estimate the projected revenue from sales of the product. If the projected sales were $500,000, the operating expenses and depreciation would be subtracted from this total. Costs can include research and development costs, depreciation, new equipment and annual overhead expenses. If these costs totaled $100,000, then the operating earnings before taxes would be $400,000. With estimated taxes at 10 percent, another $40,000 would have to be subtracted from this for a total of $360,000 in operating earnings after taxes.

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