36. Gray's Crib, a 100 seat fine-dining restaurant, expects to start operations in December of 2020. Gray, the owner, heard you talking about the bottom-up approach to pricing, and approached you for your assistance. She has provided you with the following information. Her required return on investment (ROI) is 45%.

Items.........................................Amount

Investment..............................$450,000

Capital Borrowed....................$100,000

Interest rat........................................12%

Income tax rate.................................30%

Fixed Cost (Excluding interest)..$175,000

Labour Cost (% of food sales)..........20%

Food Costs (% of sales)......................40%

Labour Cost (fixed)...................$120,000

Controllable Fixed Costs..........$115,000

Seat Turnover (times per day).........10

Days Open during the year............360

You are required to:

(a) Calculate the required average price per meal using the bottom approach to pricing for Gray's Crib. 

(b) Assume the restaurant required revenue is divided among breakfast, lunch and dinner, 25%, 30%, and 45% respectively. Further, assume that seat turn for breakfast, lunch and dinner are 2, 2.5 and 3 respectively. Calculate the average price for breakfast lunch and dinner.

(c) Explain two (2) other pricing methods, giving advantages and disadvantages of each.

Answer rating: 100% (QA)

ANSWERS a Average price per meal 5811 b Average price for breakfast 3846 Average price for lunch 4807 Average price for dinner 6727 c Two other pricin... View the full answer