Question

Expenses for a Pizza restaurant include raw material for pizza at $6.00 per slice, $106.00 as monthly rental and $40.00 monthly as insurance. Lost sale expense is considered to be $5.00 per unhappy customer. Leftover Pizza can be sold for $3. The restaurant is open 25 days in a month.

Today the restaurant prepared 200.00 pizza slices and sells them for $14.00/slice. There was a party at a nearby office so the demand for pizza went up to 220.00 slices. How much profit did the restaurant earn today?

Answer 1

Answer)

Profit earned by restaurant today = $1,494.16

Explanation :

Sales Revenue = Number of Pizza slices prepared * Selling Price per slice

= 200 * $14

= $2,800

Material Cost = Number of Pizza slices prepared * Material Cost per slice

= 200 * $6

= $1,200

Fixed Cost per day = (Monthly Rental Expense + Monthly Insurance Expense) / Number of days restaurant is open in a month

= ($106 + $40) / 25

= $146 / 25

= $5.84

Lost Sale Expense = (Slices demanded - Slice prepared) * Lost Sale Expense per unhappy customer

= (220 - 200) * $5

= 20 * $5

= $100

Profit for the day = Sales Revenue for the day - Material Cost for the day - Fixed Cost for the day - Lost Sales Expense for the day

= $2,800 - $1,200 - $5.84 - $100

= $1,494.16

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