How many meals must the homs serve each night to earn

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Reference no: EM13132922

Steve and Linda Hom live in Bartlesville, Oklahoma. Two yearsago, they visited Thailand. Linda, a professional chef, wasimpressed with the cooking methods and the spices used in the Thaifood. Bartlesville does not have a Thai restaurant, and the Homsare contemplating opening one. Linda would supervise the cooking,and Steve would leave his current job to be the maitre d'. Therestaurant would serve dinner Tuesday through Saturday. Steve hasnoticed a restaurant for lease. The restaurant has seven tables,each of which can seat four. Tables can be moved together for alarge party. Linda is planning two seatings per evening, and therestaurant will be open 50 weeks per year.

The Homs have drawn up the following estimates:

Average revenue, including beverages anddessert $45 per meal
Average cost offood $15 per meal
Chef's and dishwasher'ssalaries $61,200 per year
Rent (premises,equipment) $4,000 per month
Cleaning (linen andpremises) $800 per month
Replacement of dishes, cutlery,glasses $300 per month
Utilities, advertising,telephone $2,300 per month


Compute the annual breakeven number of meals and sales revenuefor the restaurant. Also compute the number of meals and the amountof sales revenue needed to earn operating income of $75,600 for theyear. How many meals must the Homs serve each night to earn theirtarget income of $75,600? Should the couple open therestaurant?

Reference no: EM13132922

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