Problem 4 The Blue Ridge Café's budget for next year indicates the following: $765,000 Revenues Total fixed costs Total variable costs Total Costs Net income before tax $91,000 $512,000 $603,000 $162,000 Revenue estimates assume 89,470 guests will be served. a. What is the guest check average? b. What are the variable costs per guests? c. How many guests must be served for the Blue Ridge Café to break even? d. If the owner needed a net income of at least $114,000, how many guests would need to be served? e. How many more guests are needed to generate a net income of $114,000 than are needed to break even?

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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Problem 4 c through h
a. What will be the fixed
b. Assuming the owner wants to maintain the original "bottom line" profit (incon
[profit] before taxes) of $70,000, how much in revenues will remain to be spent on var
able costs?
c. Assuming the owner is willing to break even on the restaurant's operation, how muc
in revenues will remain to be spent on variable costs?
Problem 4
The Blue Ridge Café's budget for next year indicates the following:
$765,000
Revenues
Total fixed costs
Total variable costs
Total Costs
Net income before tax
$91,000
$512,000
$603,000
$162,000
Revenue estimates assume 89,470 guests will be served.
a. What is the guest check average?
b. What are the variable costs per guests?
c. How many guests must be served for the Blue Ridge Café to break even?
d. If the owner needed a net income of at least $114,000, how many guests would need to
be served?
e. How many more guests are needed to generate a net income of $114,000 than are
needed to break even?
f.
If the Blue Ridge Café decides to close during two months that traditionally generate
slow business, it will lose about 18,000 guests. If the owner chooses to do this, what
will be the new net income or loss?
g. The manager is considering a kitchen renovation that will add $7,500 in new fixed
costs (depreciation and interest) each year. How much will the café's net income (loss)
be if it does this during the first year that it closes for two months? (See Question F
above.)
h. The Blue Ridge Café closes for two months (Question F), incurs the additional fixed
costs (Question G), and is the "victim" of a problem in the economy that results in a
14-percent increase in variable costs. How many additional guests are needed for it to
maintain its net income level (Question G)?
Problem 5
The Anytown Restaurant has recorded the following financial information:
Food costs
Labor costs
All other costs (including fixed costs)
Net income (profit)
Number of mont
$365,000
$315,000
$224,000
$76.000
Transcribed Image Text:a. What will be the fixed b. Assuming the owner wants to maintain the original "bottom line" profit (incon [profit] before taxes) of $70,000, how much in revenues will remain to be spent on var able costs? c. Assuming the owner is willing to break even on the restaurant's operation, how muc in revenues will remain to be spent on variable costs? Problem 4 The Blue Ridge Café's budget for next year indicates the following: $765,000 Revenues Total fixed costs Total variable costs Total Costs Net income before tax $91,000 $512,000 $603,000 $162,000 Revenue estimates assume 89,470 guests will be served. a. What is the guest check average? b. What are the variable costs per guests? c. How many guests must be served for the Blue Ridge Café to break even? d. If the owner needed a net income of at least $114,000, how many guests would need to be served? e. How many more guests are needed to generate a net income of $114,000 than are needed to break even? f. If the Blue Ridge Café decides to close during two months that traditionally generate slow business, it will lose about 18,000 guests. If the owner chooses to do this, what will be the new net income or loss? g. The manager is considering a kitchen renovation that will add $7,500 in new fixed costs (depreciation and interest) each year. How much will the café's net income (loss) be if it does this during the first year that it closes for two months? (See Question F above.) h. The Blue Ridge Café closes for two months (Question F), incurs the additional fixed costs (Question G), and is the "victim" of a problem in the economy that results in a 14-percent increase in variable costs. How many additional guests are needed for it to maintain its net income level (Question G)? Problem 5 The Anytown Restaurant has recorded the following financial information: Food costs Labor costs All other costs (including fixed costs) Net income (profit) Number of mont $365,000 $315,000 $224,000 $76.000
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