BACKGROUND
You just inherited a million dollars from your grandfather. You always had a talent for cooking and have long dreamed of opening an expensive gourmet restaurant. You are happy living near your college’s campus and would like to open a four-star restaurant across the street from school.
Of course, the restaurant would have certain fixed costs; for example, management salaries, utilities, interest, license fees, and property taxes. The only variable costs would be the food, beverages, and preparation costs. The fixed costs are estimated at $440,000 per year while the average variable cost per meal is estimated at $15. These meals would be sold for an average of $27 each.
ASSIGNMENT INSTRUCTIONS:
Perform a break-even analysis using the formula for calculating the break-even point (LO-14-7), answer the following questions:
BEP Formula
How many units will you have to sell each year to break even?
How many units will you have to sell each evening (use a 365-day year) to break even?
How much profit will the restaurant earn on sales of 40,000 meals?
Show your work.
SUBMISSION INSTRUCTIONS:
Save the completed document using the following format: Lastname_Firstname_Ch14-CTE (For example: Carcioppolo_Joann_Ch14-CTE)
Upload your assignment file as a Microsoft Word document or Excel spreadsheet, and click
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Sample Solution