What factors should the Homs consider before they make their decision as whether to open the restaurant? Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visitedThailand. Linda, a professional chef, was impressed with the cooking methods and thespices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homsare contemplating opening one. Linda would supervise the cooking, and Steve wouldleave his current job to be the maître d'. The restaurant would serve dinner Tuesdaythrough Saturday.Steve has noticed a restaurant for lease. The restaurant has seven tables, eachof which can seat four. Tables can be moved together for a large party. Linda isplanning on using each table twice each evening, and the restaurant will be open 50weeks per year.The Homs have drawn up the following estimates:Average revenue, including beverages and desserts$ 45 per mealAverage cost of food15 per mealChef's and dishwasher's salaries5,100 per monthRent (premises, equipment)4,000 per monthCleaning (linen, premises)800per monthReplacement of dishes, cutlery, glasses300per monthUtilities, advertising, telephone2,300 per month

Variable costs are those costs which are incurred in proportion to the production output or units…

Answered: Homs consider before they make their…

Business

Accounting

Homs consider before they make their decision as whether to open the restaurant?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

What factors should the Homs consider before they make their decision as whether to open the restaurant?

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 which can seat four. Tables can be moved together for a large party. Linda is
planning on using each table twice each evening, and the restaurant will be open 50
weeks per year.
The Homs have drawn up the following estimates:
Average revenue, including beverages and desserts
$ 45 per meal
Average cost of food
15 per meal
Chef's and dishwasher's salaries
5,100 per month
Rent (premises, equipment)
4,000 per month
Cleaning (linen, premises)
800
per month
Replacement of dishes, cutlery, glasses
300
per month
Utilities, advertising, telephone
2,300 per month

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