Q.1: Compute the annual breakeven number of meals and sales revenue for the restaurant.A.1 : Chefs and dishwashers salaries $ 61,200Rent ($4,000 x 12) ..$ 48,000Cleaning (linen and premises) ($800 x 12) $ 9,600Replacement of dishes, cutlery, glasses ($300 x 12) $ 3,600Utilities, advertising, telephone ($2,300 x 12) $ 27,600 --------------- Total $150,000 ========= Average revenue $45 per meal minus average cost of food $15 per meal equals $30 per meal. The annual breakeven number of meals is total cost $150,000 divide by $30 per meal which comes to an annual breakeven of 5,000 meals. Whereas, the total sales revenue for the restaurant is 5,000 meals x $45 per meal = $225,000.

A.2:

Contribution - Fixed Cost = Operating IncomeContribution - $150,000= $75,600

Contribution = $150,000 + $75,600 = $225,600

The number of meals needed is Contribution $225,600 divide by $30 ($45 - $15) per meal equals 7,520 meals.

Therefore, the number of meals needed to earn operating income of $75,600 for the year is 7,520 meals. Q.2: Compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year.

A.3:

The answer is 7,520 meals divide by 250 days (50 wks/year x 5 days/wk) equals 30 meals per night. Therefore, the restaurant must serve 30 meals per night in order to achieve the target income of $75,600.Q.3: How many meals must the restaurant serve each night to earn their target income of $75,600?

Q.4: Should the couple open the restaurant?A.450% capacity

28$30210,000150,00060,000Most likely 55% capacity

31$30232,500150,00082,500Max capacity74256$30420,000150,000270,000

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