Question

A New-Edge restaurant in town provides six-sense experiential dining experience to their customers. The owner of the restaurant is interested to understand the break-even point of the business. The following table provides the necessary information regarding their business: Variable Cost % of Revenue $0.65 Items Soft Drink Burger lea Dessert Selling Price $1.25 $2.00 $1.00 $1.00 $0.95 $0.30 $0.35 31 The previous owner has advised the new owner to be sure to add 10% of variable cost as a waste allowance for all categories (.e., increase the variable cost by 10%). Labor cost is estimated to be $300.00 (5 equipments with 3 people each) fixed per day. Even if nothing is sold, the labor cost will be $300.00, so it is considered to be a fixed cost. Equipment rental, which is a regular cost at $50.00 for each equipment per day, is also a fixed cost. a) Based on the information available, per day break-even point in dollars for the restaurant = $ (round your response to two decimal places). b) Based on the given information, per day break-even point (in numbers) for Burgers = burgers (round your response to one decimal place).

Answer 1

A multi product company will calcualte its break even point by using following formula
Break even point =	Total fixed expenses
	Weighted average selling price - Weighted average variable expenses
Weighted avrage selling price = ($ 1.25 * 26%) + ($ 2 * 26%) + ($ 1 * 31%) +($ 1 * 17%) = $ 1.325
Weighted avrage variable expenses =
Items	Variable cost ($)	Revised Variable cost ($)	% of revenue	Weighted average variable cost ($)
Soft drink	0.65	0.72	26	0.19
Burger	0.95	1.05	26	0.27
Tea	0.30	0.33	31	0.10
Dessert	0.35	0.39	17	0.07
				0.63
Total fixed expesnes = $ 300 + $ 50*5 = $ 550
Break even point = $ 550 / ($ 1.325 - $ 0.63) = 791.37 units
Comptation of each product to be sold out of 791.37 units
Items	% of revenue	units to be sold	Selling price	Break even point in $
Soft drink	26	205.76	1.25	257.20
Burger	26	205.76	2	411.51
Tea	31	245.32	1	245.32
Dessert	17	134.53	1	134.53
	Break even point in $			1,048.57
Break even point in number for burger is 205.76 burgers i.e. 206 burgers