Decision Case 20-1 Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve has noticed a restaurant for lease. The restaurant has seven tables, each of Linda is planning which can seat four. Tables can be moved together for a large party. open 50 weeks two seatings per evening, and the restaurant will be The Homs have drawn up the following estimates: per year. Average revenue, including beverages and desserts Average cost of food Chef's and dishwasher's salaries Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone DE OLAL ora $ 45 per meal 15 per meal 5,100 per month 4,000 per month 800 per month 300 per month 2,300 per month Requirements 1. Compute the annual breakeven number of meals and sales revenue for the restaurant. 2. Compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year. 3. How many meals must the Homs serve each night to earn their target profit of $75,600? o their decision as to
Decision Case 20-1 Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve has noticed a restaurant for lease. The restaurant has seven tables, each of Linda is planning which can seat four. Tables can be moved together for a large party. open 50 weeks two seatings per evening, and the restaurant will be The Homs have drawn up the following estimates: per year. Average revenue, including beverages and desserts Average cost of food Chef's and dishwasher's salaries Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone DE OLAL ora $ 45 per meal 15 per meal 5,100 per month 4,000 per month 800 per month 300 per month 2,300 per month Requirements 1. Compute the annual breakeven number of meals and sales revenue for the restaurant. 2. Compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year. 3. How many meals must the Homs serve each night to earn their target profit of $75,600? o their decision as to
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Decision Case 20-1
Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand.
Linda, a professional chef, was impressed with the cooking methods and the spices used in
Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating
opening one. Linda would supervise the cooking, and Steve would leave his current job to
be the maître d'. The restaurant would serve dinner Tuesday through Saturday.
Steve has noticed a restaurant for lease. The restaurant has seven tables, each of
Linda is planning
which can seat four. Tables can be moved together for a large party.
open 50 weeks
two seatings per evening, and the restaurant will be
The Homs have drawn up the following estimates:
per year.
Average revenue, including beverages and desserts
Average cost of food
Chef's and dishwasher's salaries
Rent (premises, equipment)
Cleaning (linen, premises)
Replacement of dishes, cutlery, glasses
Utilities, advertising, telephone
Seora
$
45 per meal
15 per meal
5,100 per month
4,000 per month
800 per month
300 per month
2,300 per month
Requirements
1. Compute the annual breakeven number of meals and sales revenue for the
restaurant.
2. Compute the number of meals and the amount of sales revenue needed to earn
operating income of $75,600 for the year.
3. How many meals must the Homs serve each night to earn their target profit of
$75,600?
4. What factors should the Homs consider before they make their decision as to
whether to open the restaurant?
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