Vine Dining is considering the introduction of degustations on a once-a-month ba

Question

Vine Dining is considering the introduction of degustations on a once-a-month basis. Sophie is currently considering pricing options for this venture. All food and beverages are included in the price. The average degustation includes eight courses served over four hours with wines selected to match the dishes. It is estimated that each degustation will require five hours for service staff (six waiting staff at $18.95 per hour) and eight hours for kitchen staff (five staff at $21.00 per hour). In addition to the usual variable cost per person for normal service ($16.50), an additional $5.50 in food costs per person and $250 for all wines per degustation. No other costs are expected to change.

1. First, outline the pricing approaches that could be used by Vine Dining for pricing the per person rate for a degustation.

2. Next, Sophie has a target mark-up rate of 53% on total cost, and price her degustations at $150 per person. Can she meet this target? Use target pricing and showing your calculations

3. Calculate the following a. Selling price per person with a mark-up of 53% on total cost b. Total sales revenue per degustation based on the selling price calculate in a.

Explanation / Answer

Part 1 Service staff 94.75 (18.95*5) Kitchen Staff 168 (21*8) Wines 250 Total 512.75 Per Person Cost 64.1 (512.75/8) Variable cost 16.5 Additional cost 5.5 Total 86.1 Mark-up (86.1*53%) 45.633 Selling Price 131.733 Part 2 she will meet the target at $150 per person Part 3 Selling price per person will be 131.733

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