Use the following restaurant details to answer the below question. -A restaurant
ID: 1108138 • Letter: U
Question
Use the following restaurant details to answer the below question.
-A restaurant can seat 50 people at a time.
-Fixed costs for salaries, rent, some utilities, property tax, and advertising run $5,000 per month.
-Variable costs other than food (linens, hourly labor, dishes, disposable supplies) run $3 per customer on average.
-The restaurant is open Tuesday-Saturday for dinner only.
1. If the restaurant wants to keep food cost at 32%, what price does the restaurant have to charge a meal with $3.50 in food ingredients?
Explanation / Answer
A restaurant can seat 50 people at a time.
-Fixed costs = $5,000 per month.
-Variable costs = $3 per customer on average.
-The restaurant is open Tuesday-Saturday for dinner only.
The restaurant wants to keep food cost at 32% and a meal has $3.50 in food ingredients
Total cost in a month with total 8 days operational
TC = 5000 + 3*Q + 3.5*Q
= 5000 + 6.5Q
Total revenue is Price x Q + 32% of 3.5Q
= PQ + 1.12Q
Now Q is 400. (50 seats each of the 8 days)
TC = 5000 + 6.5*400 = 7600
TR = 400P + 448
Find price
400P + 448 = 7600
P* = 17.88 per meal