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Imagine you own a restaurant. Sales are a little slow during the week, so you decide...

Imagine you own a restaurant. Sales are a little slow during the week, so you decide to send a 20% off electronic coupon to your customer list, hoping to increase business. Your costs (food and labor) are generally 65% of the original price of a meal. How many more customers do you have to serve to match the same level of profitability per customer as you have reached without the use of a coupon?

Price per meal $20    Price per meal with coupon _____

Costs $13                                                  Costs _____

Profit $7                     Profit _____

No. of Customers 1              No. of Customers 1

a. Fewer customers

b. 20% more customers

c. The same number of customers

d. 233% more customers

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Answer #1

price per meal with coupon = $20-20% = $16

Costs after allowing meal coupon = $13 + (20*20%) = $17

profit after allowing meal coupon = $7 - $4(coupon) = $3

answer is B i.e 20% more customers

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