Corner Tavern is a small-town bar that sells only bottled beer. The average price of a bottle of beer at the tavern is $3.00 and the average cost of a bottle of beer to the tavern is $1.00. The tavern is open every night. One bartender and two to three waitresses are on duty each night. The fixed costs (salaries, rent, tax, utilities, etc.) total $260,000 per year.
a. The owner wishes to know how many bottles of beer the tavern must sell during tire year to start making profit.
b. What is the revenue at the breakeven quantity found in the part a?
c. Draw the annual revenue and total annual cost vs. the number of bottles of beer sold per year. Make sure that the y-axis is to scale. Identify the important points on the graph.
d. Using the graph in part c, answer the following question: If CornerTavern sells 140,000 bottles of beer a year, would it make a profit? Explain,
e. The owner thinks $50,000 is a reasonable annual profit. How many bottles of beer should the tavern sell to make $50,000 profit?
f. An available option is to open the tavern earlier on the weekends. The attraction would be a discount of $0.50 off the regular price. The extra salaries of waitresses and bartender for the whole year are estimated to be $30,000. How many extra bottles of beer must the tavern sell in order to break even in this option?