The Express Banquet has two restraunts that are open 24 hrs a day. Fixed costs f

Question

The Express Banquet has two restraunts that are open 24 hrs a day. Fixed costs for the two restraunts together total $459,000 pr year. Service varies from a cup of coffee to a full meal. The average sales check per customer is $8.50. The average cost of food and other variable costs for each customer is $3.40. The income tax rate is 30%. Target net income is 107,100.
1. Compute the revenues needed to earn the target net income.
2. How many customers are needed to break even? To earn net income of $107,100?
3. Compute net income if the number of customers is 170,000.

Explanation / Answer

Your total costs include the fixed costs, added to the cost of food and variable cost per customer and lastly, applying the tax (you get to keep 70% of your net income). You can define a variable to represent the number of customers, say x. So, the total cost is 459,000 + 3.4x The total revenue will be from the sales checks. This gives you 8.5x. To the revenue will be the difference between the two, then you apply the income tax. 2. Use that equation and put the net revenue as 0 and solve for x. 3. Put x = 170000 and find the net income.

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