I absolutely hate my Business Management class, but I need it for my AA degree. My instructor always assigns us homework that has absolutely nothing to do with what we learned that week. And this time he assigned a long math-related problem. Could someone please help me figure this out or at least give me a formula to work with? I’m good at math, I just can’t for the life of me ever figure out the formula in word problems. So here it is:

Against your advice, your brother-in-law (who won big in the Washington State Lottery) has decided to open an expensive gourmet restaurant across from your college’s campus. He feels that operating anything less than a four-star restaurant would be a waste of his creative talents.

Such a restaurant will have certain fixed costs. These fixed costs include depreciation, salaries, heat, advertising, electricity, interest, license, fees, and property taxes. The only variable costs would be food, beverages, and preparation costs. The fixed costs are estimated at $438,000 per year. The average variable cost per meal is estimated at $13.00. These meals would be sold for an average of $25.00 each.

Hint for Critical Thinking:

How many units will the restaurant have to sell each year to breakeven? I need to do a calculation involving fixed costs, variable costs and contribution margin (selling price less ??costs). Better find the breakeven formula in the text.

Required:

1. How many units will the restaurant have to sell each year to breakeven?

2. How many units will the restaurant have to sell each evening (use a 365-day year) to breakeven?

3. Considering your community, does it seem likely that there is a large enough market for gourmet food for the restaurant to operate at or beyond the breakeven point?

4. If the answer to question #4 above is negative, what do you tell your brother in law?

How much profit will the restaurant earn on sales of 40,000 meals?

Please help! I’m horrible at math problems like this. I would be able to do it myself if my instructor had given me a formula to work with. Thank you!

## Help With This Homework Problem?

November 4th, 2012 admin

Breakeven is when the profit you make from selling your product is equal to your fixed costs.

Profit on each meal is 25 – 13 = $12

1.438,000 = 12x, where x = meal units sold per year

x = 365,000

2. (365,000 meals/year) / (365 days/year) = 100 meals/day