A 100-seat restaurant with average daily turnover of 2 and average check of $15 opens 365 days a year. Food cost is 38% of revenue and other variable costs is 22% of the revenue. Fixed costs are $220,000 a year. a. How much is the variable cost per customer? b. How many customers does the restaurant have to serve if the owner wants a $200,000 operating income? c. The owner is not satisfied with the operating income and wants to improve it to $250,000 by increasing the average check to $17. To avoid customers deflecting to other restaurants, the owner will spend an additional $30,000 on advertising (additional fixed cost). The owner also wants to add $20,000 her own salary (another additional fixed cost). Assuming the variable costs per customer do not change (the same as in question a.), how many customers the restaurant needs to serve now?

A 100-seat restaurant with average daily turnover of 2 and average check of $15 opens 365 days a year. Food cost is 38% of revenue and other variable costs is 22% of the revenue. Fixed costs are $220,000 a year. a. How much is the variable cost per customer? b. How many customers does the restaurant have to serve if the owner wants a $200,000 operating income? c. The owner is not satisfied with the operating income and wants to improve it to $250,000 by increasing the average check to $17. To avoid customers deflecting to other restaurants, the owner will spend an additional $30,000 on advertising (additional fixed cost). The owner also wants to add $20,000 her own salary (another additional fixed cost). Assuming the variable costs per customer do not change (the same as in question a.), how many customers the restaurant needs to serve now?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

See similar textbooks

Similar questions

The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.75. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 36%. Target net income is $117,600. Q1. Compute the revenues needed to earn the target net income. Q2. How many customers are needed to break even? To earn net income of $117,600? Q3. Compute net income if the number of customers is 170,000.
The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cupm of coffee to full meals. The average sales check per customer is $8.75. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 36%. Target net income is $117,600 Requirements 1. Compute the revenues needed to earn the target net income. 2. How many customers are needed to break even? To earn net income of $117,600? 3. Compute net income if the number of customers is 170,000. Requirement 1. Compute the revenues needed to eam the target net income. Using the equation method, select the basic formula used to compute the revenues needed to eam the target net income. Target net income 1-Tax rate Revenues Variable costs Fixed costs 1,023,750 The revenues needed to earn the target net income is $ Requirement 2. How many customers are needed to break even? To earn net income of…
s
A restaurant has 145 seats needs $60,000 to earn the annual interest payment to the bank. Its monthly fixed labor cost is $7,800 along with other annual fixed cost of $270,000. It has a guest check average of $22 and per guest average cost of $15.50. What revenue is needed to cover all costs? What average daily seat turnover will be needed, assuming the operation is closed 3 days a year?
The Oriole Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $56 a night. Operating costs are as follows. Salaries Utilities Maintenance Depreciation 1,300 Maid service $5,800 Other costs 2.700 700 8 34 per month per month per month per month per room. per room
A business has fixed costs of $6000 per month and the product sells for $200. The variable cost is $85 per unit. The business wishes to make a profit of $7000 before tax. How many units must be sold? Answer in whole units only.
1.Java Joe’s operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $2,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of rent is which kind of cost? Fixed cost Variable cost Mixed cost Relevant cost Question 2.2.Select the correct statement regarding fixed costs. They do not change, because fixed costs should be ignored in decision making. The fixed cost per unit increases when volume increases. The fixed cost per unit decreases when volume increases. The fixed cost per unit does not change when volume decreases. Question 3.3.Gypsy Joe’s operates a chain of coffee shops. The company pays rent of $10,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all…
The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating costs are as follows. Salaries $10,850 per month Utilities 2,900 per month Depreciation 1,600 per month Maintenance 850 per month Maid service 8 per room Other costs 34 per room Determine the inn’s break-even point in (1) number of rented rooms per month and (2) dollars. 1. Break-even point in rooms 2. Break-even point $ If the inn plans on renting an average of 50 rooms per day (assuming a 30-day month), what is (1) the monthly margin of safety in dollars and (2) the margin of safety ratio? (Round ratio to 0 decimal places, e.g. 10.) 1. Margin of safety $ 2. Margin of safety ratio %
The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $56 a night. Operating costs are as follows. Salaries Utilities Depreciation Maintenance Maid service Other costs $10,600 per month 2.600 per month 1,400 per month 700 per month 7 31 per room 2 Determine the inn's break-even point in (1) number of rented rooms per month and (2) dlars. per room Break-even point in rooms Break-even point
The LeeAnn Family Restaurant is open 24 hours a day and serves breakfast, lunch, and dinner. The owner of the business has determined that fixed costs are $24,000 per month. Variable costs are estimated at $9.60 per meal. The average total bill (excluding tax and tip) is $12 per customer. 1. Compute the break-even point in meals. 2. Compute the break-even volume in dollars. 3. Compute the number of meals that must be served if the LeeAnn Family Restaurant wishes to earn a profit of $6,000.
The Best Taste ice cream company has a weekly fixed cost of $ 325 and a cost of $1.5 per cup. The cups of ice-cream are sold for $4. i) Find the cost and revenue functions. ii) How many cups must be sold for break-even? What is break even revenue? iv) The maximum number of cups per week is 100. Is this a profitable business? Explain
The Sandhill Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rent at $120 a night. Operating costs are as follows: Salaries $5400 per month Utilities $1300 per month Depreciation $1100 per month Maintenance $2520 per month Maid service $33 per room Other costs $63 per room a/ Determine the inn’s break-even point in number of rented rooms per month. b/Determine the inn’s break-even point in dollars.