Question

"The owner of a small restaurant that sells take-out fried chicken and biscuits pays $2,500 in rent each month, $500 in utilities, $750 interest on his loan, insurance premium of $200, and advertising on local bus $250 a month. A small bucket of take-out chicken, the only menu item, is priced at $9.50. Unit variable costs for the bucket of chicken are $5.50. At what level of sales of dollars of revenue will the restaurant break-even

Answer 1

Answer:

Break-even point (dollars)= $9,976.25

Explanation:

Giving the following information:

Fixed costs:

Rent $2,500

Utilities $500

Interest $750

An insurance premium of $200

Advertising on local bus $250 a month

Total= $4,200

A small bucket of take-out chicken, the only menu item, is priced at $9.50. Unit variable costs for the bucket of chicken are $5.50.

To calculate the break-even point in dollars, we need to use the following formula:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)=  4,200/ [(9.5 - 5.5)/9.5]

Break-even point (dollars)= 4,200/0.421

Break-even point (dollars)= $9,976.25