3 Given the following information calculate the number of me

3. Given the following information, calculate the number of meals a restaurant would have to sell to break even: (10%) Average meal price = $10.35 Meals sold- 8560 Food- $27653 Food labor = $183 86 Supplies- $3133 Management = $4855 Maintenance $2213 Bouns = $1650 Insurance $1904 | Waste management-$988 Utilities- $3159 Rent- $3960

Solution

Variable cost is the cost which changes with changes in volume of output. In the given case the variable cost include only food and food labor and all other costs are fixed costs.

Total Variable cost = Food+Food labor

= $27,653+$18,386 = $46,039

Variable cost per meal = Total variable cost/Meals sold

= $46,039/8,560 = $5.38 per meal

Contribution Margin per unit = Average meal price - Variable cost per meal

= $10.35 - $5.38 = $4.97 per meal

Total Fixed cost = Supplies+Management+Bonus+Insurance+Waste management+Utilities+Rent

= $3,133+$4,855+$2,213+$1,650+$1,904+$988+$3,159+$3,960

= $21,862

Break Even meals = Total Fixed cost/Contribution margin per meal

= $21,862/$4.97 per meal = 4,399 meals (approx.)

Therefore, the number of meals a restaurant would have to sell to break even is 4,399 meals.