A restaurant is being planned that will require an investment of $150,000 in equ
ID: 2455076 • Letter: A
Question
A restaurant is being planned that will require an investment of $150,000 in equipment by the owner. The following shows forecasted variable cost percentages, identifiable fixed, and semifixed costs. Variable costs will be: Food cost is 38% of sales revenue Wage cost is 27% of sales revenue Other variable costs are 10% of sales revenue Other known costs will be: Management salary and wages $48,000 Insurance expense 2,800 Advertising expense 4,500 Utilities and telephone expense 3000 Rent expense 21,600 Equipment depreciation expense 20% a. What is the breakeven level of sales revenue for the restaurant? Prepare a contribution margin income statement to confirm the breakeven calculations. b. What required sales revenue is needed if the owner wants a 18 percent before-tax return on investment? Prepare a contribution margin income statement to confirm the CVP calculations.
Explanation / Answer
What is the breakeven level of sales revenue for the restaurant? Prepare a contribution margin income statement to confirm the breakeven calculations.
What required sales revenue is needed if the owner wants a 18 percent before-tax return on investment? Prepare a contribution margin income statement to confirm the CVP calculations.
150000*18% =27000 return on investment
Equipment depreciation expense 30000 telephone expense 3000 Rent expense 21600 Management salary and wages 48000 Insurance expense 2800 Adverisment exp 4500 Fixed cost 109900