An owner invested $180,000 in a new family-style restaurant, of which $160,000 was immediately used to purchase
Question:
An owner invested $180,000 in a new family-style restaurant, of which $160,000 was immediately used to purchase equipment and $20,000 was retained for working cash. Estimates for the first year of business are as follows:
Menu selling prices to be established to give a markup of 150 percent over cost of food sold
Variable wages, 28 percent of revenue
Fixed wages, $51,600 Other variable costs, 7 percent of revenue
Rent, $36,000
Insurance, $4,800
Depreciation on equipment, 20 percent
Return on investment desired, 12 percent
Income tax rate,30 percent.
The restaurant has 60 seats and is open 5 days a week for lunch and dinner only. Lunch revenue is expected to be 40 percent of total volume with 2 seat turnovers. Dinner revenue will be 60 percent of total volume, with 1.25 turnovers. Calculate the average check per meal period that will cover all costs, including desired return on investment.
Expert Answer:
Let total cost is x Total revenue 150100x Variable wages 28 150100x Other Var... View the full answer
