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The idea for Subway’s $5 footlong sandwich was conceived by a Subway restaurant owner over 5 years ago.  The sandwich is now a cornerstone of Subway’s marketing campaign.  In fact, some people within Subway believe that every time a competitor markets a $5 product, the customer thinks of Subway.

As a direct result of offering a $5 footlong (not $4.99), weekend sales increased anywhere from 17 – 30%.  The idea was test marketed and then later rolled out across the country.

Questions:

1. Which costs are likely the most important costs for a local Subway restaurant?  Which costs are likely the most important costs for the Subway?

2. Describe three ways that CVP analysis might be used by Subway to meet different profit goals.

3. Describe how activity-based costing might be beneficial to Subway.

(Retrievable online at http://feedroom.businessweek.com/index.jsp?auto_band=x&rf=sv&fr_story=968e65464a680411cedca043d4d5abd05453e971)

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