Essay on Fast Food Profit - 2137 Words

Fast Food Profit The American economy relies upon competitive exchange: a process where opposition within a market creates standards for quality and price valuation. To insure the quality of American products the US government encourages a competitive market and enforces regulations. Capitalism is a system of private ownership of capital that relies on market forces to govern the distribution of goods (Goldstein 533). In an ideal capital market companies will produce their product to meet consumer tastes, government regulations, and beat similar competitive products. As a capitalist rule: the more competition that enters the market, the better the quality and prices. However, even though there are many fast food†¦show more content†¦The selling price is basically preset by a silent agreement among large corporations, so the production cost is the only variable. The fast food industry reduces their cost of goods sold by decreasing the quantity and quality of ingredients. The accou nting ideals for a monopolistic corporation vary from a regular competitive company. In a fair capitalistic market, the price of products would be based on supply and demand with regard to the consumers; however, a monopoly is able to set the price freely without respect to their supply or demand. The fast food industry still offers a lower price because it discourages further enterers into the market and their clientele s attendance is based on the cheaper price. The fast food corporations compete with one another relative to item contribution margins, which translate into overall profit. Gross margin (which is also called gross profit) is the excess of sales over the cost of goods sold  (Horngren 58). The product s contribution margin is the cost of production subtracted from the selling price. The fixed sales price leaves the cost of production as the only variable. There are only two ways a fast food company can reduce the cost of goods sold: altering the quantity and /or quality of their ingredients. Corporation implement a combination of three ways to reduce ingredient costs: renegotiate deals with a supplier, startShow MoreRelatedBurger King Case Study1437 Words   |  6 PagesPrin. Of Marketing Burger King Case Study In the fast food world the market for the consumer’s dollars is as cutthroat as in any market out there. So far McDonald’s and its golden arches have reined supreme, leaving the leftovers for the likes of Wendy’s and Burger King. After several years of steadily declining profits, and upset franchisees, Burger King decided it was time for a change, both in its approach towards it marketing structure to the way it built and supplied new locations. 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