Problems #4 Managerial Accounting?

Ward and June Cleaver live in Lowell, Massachusetts. Two years ago, they visited Thailand.
June, a professional chef was impressed with the cooking methods and the spices used in the
Thai food. Lowell does not have a Thai restaurant, and the Cleavers are contemplating opening
one. June would supervise the cooking, and Ward would leave his current job to be the maitre
d’. The restaurant would serve dinner Tuesday through Saturday.
Ward 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. June is planning two seatings per evening,
and the restaurant will be open 50 weeks per year.
The Cleavers have drawn up the following estimates:
Average revenue, including beverages and dessert – $40 per meal
Average cost of the food – $12 per meal
Chef s and Dishwasher’s salaries – $ 50,400 per year
Rent (premises, equipment) – $4,000 per month
Cleaning (linen and premises) – $800 per month
Replacement of dishes, cutlery, glasses – $300 per month
Utilities, advertising, telephone – $1900 per month
l. Compute the annual breakeven number of meals and sales revenue for the restaurant.
2. Compute the annual number of meals and the amount of sales revenue needed to earn
operating income of $75,600 for the year.
3. How many meals must the Cleavers serve each night to earn the target income of $75,600?
4. Should the Cleavers open the restaurant?
S1,900 per month0 per month

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