Session 6 Exercises copy.docx - Chapter 6 Cost Approaches to Pricing Problem 1 Lily Anderson owner of the 100-seat Lake View Restaurant provides you

Session 6 Exercises copy.docx - Chapter 6 Cost Approaches...

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Chapter 6: Cost Approaches to Pricing Problem 1: Lily Anderson, owner of the 100-seat Lake View Restaurant, provides you with cost and other information as follows: Monthly fixed costs $40,000 Variable cost 60% Owner’s equity $240,000 Desired ROI 20% Average tax 30% Required: 1) Compute monthly breakeven sales. Breakeven sales=$40,000+sales*60% Breakeven sales=$100,000 CMR=40% $40,000/0.4=$100,000 2) What are the monthly sales when the desired profits are made? Sales 114,285.714 -VC 60% CM 40% $45,714.29 FC $40,000 EBT $4,000/70%=5,714.29 -Tax 30% NP $4,000 ROI 20% $240,000*20%=$48,000/12months=$4,000 3) What is the average food check to reach the desired profit in 2), assuming the seat turnover rate is 2 and the restaurant opened 24 days in February? $114,285.714/24days*100seats*2=$23.81 Problem 2: Jack Lumber is to build a 50-room lodging facility in Bouveret. To ensure a successful business, Jack has provided the following information: 1) Owner’s investment: $1,000,000 with a ROI of 15% N.P.=$150,000 2) Initial costs: $400,000 in land, $2,000,000 in building and $1,000,000 in equipment Initial costs=$3,400,000 3) The rest of the initial costs will be borrowed from the national bank with an interest rate of 8% 8%*($3,400,000-$1,000,000) =$192,000
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  • Spring '20
  • Lake View Restaurant

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