The Express Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $400,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.50. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 30%. Target net income is $140,000. 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 $140,000? 3. Compute net income if the number of customers is 150,000. Requirement 1. Compute the revenues needed to earn the target net income. Using the equation method, select the basic formula used to compute the revenues needed to earn the target net income. Variable costs Fixed costs = Target net income + 1-Tax rate $ Revenues The revenues needed to earn the target net income is $ 1,020,000 Requirement 2. How many customers are needed to break even? To earn net income of $140,000? Determine the formula that is used to compute how many customers are needed to break even, then compute the number of customers needed. Contribution margin per customer = Customers needed to break even 5.00 80,000 $ Fixed costs 400,000 $. Determine the formula that is used to compute how many customers are needed to earn net income of $140,000, then compute the number of customers needed. Sales check per customer 8.50 Customers needed to earn $140,000 120,000 - Total revenues 1,016,949 Requirement 3. Compute net income if the number of customers is 150,000. Determine the formula that is used to compute the net income when the number of customers is 150,000, then compute the net income. Net income +
The Express Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $400,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.50. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 30%. Target net income is $140,000. 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 $140,000? 3. Compute net income if the number of customers is 150,000. Requirement 1. Compute the revenues needed to earn the target net income. Using the equation method, select the basic formula used to compute the revenues needed to earn the target net income. Variable costs Fixed costs = Target net income + 1-Tax rate $ Revenues The revenues needed to earn the target net income is $ 1,020,000 Requirement 2. How many customers are needed to break even? To earn net income of $140,000? Determine the formula that is used to compute how many customers are needed to break even, then compute the number of customers needed. Contribution margin per customer = Customers needed to break even 5.00 80,000 $ Fixed costs 400,000 $. Determine the formula that is used to compute how many customers are needed to earn net income of $140,000, then compute the number of customers needed. Sales check per customer 8.50 Customers needed to earn $140,000 120,000 - Total revenues 1,016,949 Requirement 3. Compute net income if the number of customers is 150,000. Determine the formula that is used to compute the net income when the number of customers is 150,000, then compute the net income. Net income +
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:The Express Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $400,000 per year. Service varies from a cup of coffee to full meals. The average
sales check per customer is $8.50. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 30%. Target net income is $140,000.
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 $140,000?
3. Compute net income if the number of customers is 150,000.
Requirement 1. Compute the revenues needed to earn the target net income.
Using the equation method, select the basic formula used to compute the revenues needed to earn the target net income.
Variable costs
Fixed costs
= Target net income
1- Tax rate
$
Revenues
The revenues needed to earn the target net income is
$ 1,020,000
Requirement 2. How many customers are needed to break even? To earn net income of $140,000?
Determine the formula that is used to compute how many customers are needed to break even, then compute the number of customers needed.
$
Fixed costs
400,000
Total revenues
1,016,949
$
Determine the formula that is used to compute how many customers are needed to earn net income of $140,000, then compute the number of customers needed.
= Customers needed to earn $140,000
Sales check per customer
8.50
120,000
+
+
+
www
+
Contribution margin per customer Customers needed to break even
5.00
80,000
+$
Requirement 3. Compute net income if the number of customers is 150,000.
Determine the formula that is used to compute the net income when the number of customers is 150,000, then compute the net income.
Net income
=
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