Details of the restaurant's operations are provided below:-

 

Expected Sales Per Week 4,000 meals
 
Average Selling Price Per Meal                               $18
Variable Costs Per Meal                                        $6
Fixed Costs Per Week                                        $9,000
Tax rate                                                                 30%
 

Required:

 

1) How many meals must be sold each week to "break even"?  Show all calculations.
2) Calculate the Net Profit after Tax based on the expected sales per week.
2) A weekly target profit of $35,000 Net Profit After Tax has been set by the management of Perfect  Pasta. How many meals need to be sold to achieve this target?  Is this target achievable?        

 Explain your answer with reference to relevant calculations:
To increase profit, management is considering using cheaper ingredients in the pasta sauce. This would decrease the Variable Costs Per Meal to $4. Management would also increase the Average Selling Price per Meal to $20. Management believe that the expected sales per week will remain the same.

Calculate the Net Profit After Tax that would result from these changes.
Do you think management should go ahead with this strategy?

Answer rating: 100% (QA)

Ans1 Break even point BEP is the level of activity where Contribution Marg... View the full answer