Question

Lance's Diner has a hot-lunch special each weekday and Sunday afternoon. The cost of food and other variable costs for each meal served is $3.20; weekly fixed costs (e.g., building depreciation and equipment rental costs) are $6,600, regardless of how many days the diner is open per week. Lance has an average of 800 customers per day. a. What is the lowest price in total (not per meal) that Lance should charge for a special group of 500 that wants to come on Saturday for a family reunion? b. What should be the lowest price per mea/ that Lance should charge for the hot-lunch special served on weekdays and Sunday afternoons? (Round "Lowest price per meal" answer to 2 decimal places.) Lowest price in total Lowest price b. per meal

Answer 1

Solution a:

Lowest price in total for special group of 500 = Nos of people * Variable cost per meal = 500 * $3.20 = $1,600

Solution b:

Lowest price per meal = Variable cost per meal + Fixed cost per meal

= $3.20 + [$6,600 / (800*6)] = $4.58 per meal