1. Harry’s is contemplating opening a branch restaurant and bar in Lafayette. It would cost approximately $4,000,000 to acquire and furnish a new facility; Harry’s plans to depreciate this cost over 20 years. In addition it would require $262,000 per year to pay for the manager and a minimal number of staff. The average tab is $15.00 per customer. The average food cost is $2.00 per person; the average beverage cost is $3.00 per person, and other variable costs (napkins, broken glasses, etc.) average $1.25 per customer. If Harry’s is open 300 days a year, how many customers must Harry’s serve each night to break-even? Number of customers per night: NI = [(P – V)X – F] F = $4,000,000/20 + $262,000 = $462,000 in annual fixed costs V = $2.00 + $3.00 + $1.25 = $6.25/customer 0 = ($15 - $6.25)X - $462,000 X = 52,800 customer per year 52,800/300 = 176 customers per night 2. Marry Company manufactures two versions of a wedding album—the Plain and the Fancy. The budgeted income statement for the year as follows:
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