Question

The

Express BanquetExpress Banquet

has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total

$450,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is

$ 8.00.The average cost of food and other variable costs for each customer is $ 3.20 The income tax rate is

30​%. Target net income is $105,000.

Requirements

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 $105,000​?

3. Compute net income if the number of customers is 165,000.

Answer 1

Answer:

1)	Statement showing computations
	Particulars	Amount($)
	average sales check per customer	8.00
	average cost of food and other variable costs	3.20
	Contribution Margin	4.80
	CM Ratio = 4.80/8.00	60%
	Target net income	1,05,000
	Income before tax = 105,000/(1-.30)	1,50,000
	Fixed costs	4,50,000
	Desired contribution = 150000+450000	6,00,000
	Desired Sales = 600,000/60%	10,00,000
2)	No of customer to break even = 450000/4.80	93,750
	customers needed to earn net income of $105000 = 600,000/4.80	1,25,000
3)	If customers are 165,000 = 165000*4.80 - 450000	3,42,000