Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve 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. Linda is planning on using each table twice each evening, and the restaurant will be open 50 weeks per year. The Homs have drawn up the following estimates: Average revenue, including beverages and desserts $45 per meal Average cost of food 15 per meal Chef's and dishwasker's salaries 5,100 per month Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone 4,000 per month 800 per month 300 per month 2,300 per month Requirements 1. Compute the annual breakeven number of meals and sales revenue for the restaurant. 2. Compute the 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 Homs serve each night to earn their target profit of $75,600?
Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday. Steve 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. Linda is planning on using each table twice each evening, and the restaurant will be open 50 weeks per year. The Homs have drawn up the following estimates: Average revenue, including beverages and desserts $45 per meal Average cost of food 15 per meal Chef's and dishwasker's salaries 5,100 per month Rent (premises, equipment) Cleaning (linen, premises) Replacement of dishes, cutlery, glasses Utilities, advertising, telephone 4,000 per month 800 per month 300 per month 2,300 per month Requirements 1. Compute the annual breakeven number of meals and sales revenue for the restaurant. 2. Compute the 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 Homs serve each night to earn their target profit of $75,600?
Chapter1: Understanding Personal Finance
Section: Chapter Questions
Problem 3FPC
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Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and
the spices used in Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and
Steve would leave his current job to be the maître d'. The restaurant would serve dinner Tuesday through Saturday.
Steve 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. Linda is
planning on using each table twice each evening, and the restaurant will be open 50 weeks per year.
The Homs have drawn up the following estimates:
Average revenue, including beverages and
$45 per meal
desserts
Average cost of food
15 per meal
Chef's and dishwasker's salaries
5,100 per month
Rent (premises, equipment)
4,000 per month
Cleaning (linen, premises)
Replacement of dishes, cutlery, glasses
Utilities, advertising, telephone
800 per month
300 per month
2,300 per month
Requirements
1. Compute the annual breakeven number of meals and sales revenue for the restaurant.
2. Compute the 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 Homs serve each night to earn their target profit of $75,600?
4. What factors should the Homs consider before they make their decision as to whether to open the restaurant?
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