Question

A restaurant averages ales of $120,000 when serving 20,000 guests. The restaurant's variable costs when 20,000 is $90,000. The contribution margin per guest is $1.50. Fixed monthly costs are $50,000. What is the restaurant's monthly breakeven point in sales dollars?

Answer 1

Answer: Restaurant's monthly breakeven point in sales is $31333.

Step-by-step explanation:

Since we have given that

Number of guests = 20,000

Average sales = $120,000

Contribution margin per guest = $1.50

Let the number of sales be 'x'.

Cost per sales would be

$\dfrac{120000}{20000}\\\\=\ 6$

Margin contributed by 2000 guests would be

$1.50\times 20000\\\\=\ 3000$

So, Revenue function would be

$6x+3000$

Fixed monthly cost = $ 50,000

Variable cost for 20000 guests = $90000

So, Variable cost per sale would be

$\dfrac{90000}{20000}\\\\=\ 4.5$

So, Cost function would be

$4.5x+50000$

Breakeven point would be

Cost function = Revenue function

$6x+3000=4.5x+50000\\\\6x-4.5x=50000-3000\\\\1.5x=47000\\\\x=\dfrac{47000}{1.5}\\\\x=\ 31333.33\\\\x=\ 31333$

Hence, Restaurant's monthly breakeven point in sales is $31333.