The Rapid Meal has two restaurants that are open 24 hours a day. Fixed costs for

Question

The Rapid Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.75. 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 $117,600. 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 $117,600?? 3. Compute net income if the number of customers is 145,000.

Explanation / Answer

Income before tax = 117600*100/70 = 168000

Break even revenue = (430500+168000)/.60 = 997500

a) $997500 needed to earn the target net income

b) 997500/8.75 = 114000 customers are needed to break even

c) Net income :

Sale (145000*8.75) 1268750 Variable cost (145000*3.50) -507500 Contribution margin 761250 Fixed cost -430500 Income before tax 330750 Income tax -99225 Net income 231525

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