Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, Thailand. Lin

Question

Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, Thailand. Linda, a professional chef, was impressed with the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. they visited cooking methods and the Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat four. Tables can be moved together for a large party. Linda is planning on using each table twice each evening, and the restaurant will be open 50 weeks per year The Homs have drawn up the following estimates: Average revenue, including beverages and desserts Average cost of food Chef's and dishwasher's salaries Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone 45 per meal 15 per meal 5,100 per month 4,000 per month 800 per month 300 per month 2,300 per month

Explanation / Answer

Given information - restaurant has 7 tables and each of which can sit 4

linda is planning to use each table twice each evening.

Fixed cost/period cost -

Annually fixed cost = 12500*12 = 150000

revenue per meal = 45

average cost of food per meal(variable cost) = 15

Break even point = Fixed Cost / Selling price per meal - average cost of food per meal

= 150000 / (45 - 15)

= 150000 /30

= 5000 meals

2. Sales revenue annually = 7tables * 4 persons * 2(use table each evening)*50(weeks)*5(No. of days)*average revenue

= 7*4*2*50*5*45

= 630000

Assumption - restaurant would be full all the time in year.

Please note all values are in $.

In case of further clarification required please comment.

Details of fixed cost Amt in $ Chef and dishwash salaries 5100 Rent of premises & equipment 4000 cleaning 800 Replacement of dishes 300 Utilities, advertising, telephone 2300 Total Monthly fixed cost 12500

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