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 $3.50; weekly fixed costs (e.g., building depreciation and equipment rental costs) are $6,000, regardless of how many days the diner is open per week. Lance has an average of 500 customers per day.

a. What is the lowest price in total (not per meal) that Lance should charge for a special group of 200 that wants to come on Saturday for a family reunion?

b. What should be the lowest price per meal that Lance should charge for the hot-lunch special served on weekdays and Sunday afternoons? 

Answer 1

a
Number of people	200
X Cost of food and other variable costs per meal	3.50
Lowest price in total	700
b
Total meals per week	3000	=500*6
Cost of food and other variable costs per meal	3.50
Fixed cost per meal	2.00	=6000/3000
Lowest price	5.50	per meal