Scenario/Summary You are a marketing director for a Mexican Taco Restaurant loca

Question

Scenario/Summary

You are a marketing director for a Mexican Taco Restaurant located in Lynchburg, VA. The average order size of your customers is $7.00 per order. That means that when all your food orders are divided by your total number of customers, the average order amount is $7.00.

Your Role/Assignment

Your variable cost per order is $3.00 in food costs and paper products. Of course, there are also fixed costs (whether you sell one or a hundred). These include your building lease ($2,000 per month, electricity $500 per month, and labor $3,100 per month).

Check the interactive to answer the question below and submit the deliverable for this assignment.

You Decide

Break Even Analysis

Using this formula, what is the break-even point? In other words, how many meals, at $7.00, would need to be sold before you start making a profit?

Breakeven Point (number of meals) = Fixed Costs/(Average Order Price - Average Order Cost).

The problem is that, even after being in business for a year, your restaurant is selling slightly less than 1,000 meals. There are several actions that can be taken to reach your break-even point, which is necessary if you are to remain in business. As the marketing director is responsible for the product, price, promotion, and placement, you control many of the tools to make necessary adjustments.

Explanation / Answer

break even point= fixed cost/ selling price - variable cost per unit

here fixed cost= 2000+500+3100= 5600

selling price per unit= $7, and variable cost is= $3

BEP= 5600/7-3= 1400 units should be sell.

if the sales are less tha 1000 units, it will be resulted in losses, and the number has to be increase atleast 1400 units. otherwise the firm may not survive.

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