Felch Tacos is a drive-thru restaurant in a coastal town with significant seasonal changes in business. The owners are trying to decide whether to remain open during the fourth quarter of the year (October through December) given the reduced business. They estimate that the number of meal
Felch Tacos is a drive-thru restaurant in a coastal town with significant seasonal changes in business. The owners are trying to decide whether to remain open during the fourth quarter of the year (October through December) given the reduced business. They estimate that the number of meals sold in the fourth quarter will only be 40 percent of those sold in the third quarter. The number of meals sold in the third quarter was 37,000 at an average price of $7.50. The owners plan to offer a somewhat smaller menu during the fourth quarter and expect the average meal to sell for $6. The variable meal costs and the marketing cost per meal are not expected to change. The fixed meal costs will decline by 10 percent and the administrative costs will decline by 20 percent as the restaurant will be open fewer hours. The following cost information is available for third quarter:
| Meal costs | |
|---|---|
| Food costs (variable) | $ 24,600 |
| Labor (variable) | 68,700 |
| Other meal costs (variable) | 19,000 |
| Fixed meal costs | 20,700 |
| Total meal costs | $ 133,000 |
| Marketing and administrative costs | |
| Marketing (variable with respect to meals) | 15,600 |
| Administrative (fixed) | 25,000 |
| Total marketing and administrative costs | $ 40,600 |
| Total costs | $ 173,600 |
Required:
Prepare a
Note: Do not round intermediate calculations.
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