FOR A-PLUS WRITER ONLY

Case 1: Steve and Linda Homs want to open a restaurant. Linda would supervise the cooking and Steve the maitre’d. The restaurant would operate Tues- Sat. Linda is planning 2 seating’s peer evening and it will be open 50 weeks per year.

The Homs estimate

Average revenue (include drinks, desserts)………$45/meal

Average food cost………………………………...$15/meal

Chef’s, dishwashers salaries……………………...$61,200/year

Rent (equipment, premises)………………………$4,000/month

Cleaning (linen, premises)………………………..$800/month

Replacement of dishes, cutlery, glasses…………..$300/month

Utilities, advertising, telephone…………………..$2,300/month

1. Compute the annual breakeven meals and sales revenue for the restaurant.

2. Compute the number of meals and the amount of sales revenue needed to earn operating income $75,600 for the year.

3. How many meals must the Homs serve each night to earn their target income of $75,600?

4. Should the couple open the restaurant?