The owners of Backstreets Italian Restaurant are considering starting a delivery service for pizza and their other Italian dishes in the small college town where they are located. They can purchase a used delivery van and have it painted with their name and logo for $21,500.
They can hire part-time drivers who will work in the evenings from 5 P.M. to 10 P.M. for $8 per hour. The drivers are mostly college students who study at the restaurant when they are not making deliveries. During the day, there are so few deliveries that the regular employees can handle them. The owners estimate that the van will last 5 years (365 days per year) before it has to be replaced and that each delivery will cost about $1.35 in gas and other maintenance costs (including tires, oil, scheduled service, etc.). They also estimate that on average each delivery order will cost $15 for direct labor and ingredients to prepare and package, and will generate $34 in revenue.
a. How many delivery orders must Backstreets make each month in order for the service to break even?
b. The owners believe that if they have approximately the break-even number of deliveries during the week, they will at least double that number on Fridays, Saturdays, and Sundays. If that’s the case, how much profit will they make, at a minimum, from their delivery service each month (4 weeks per month)?

  • CreatedJuly 17, 2014
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