Answer:
(1) $1,230,000
(2) 110,000 customers
Explanation:
Given that,
Fixed cost = $451,000 per year
Average sales check per customer = $ 8.20
Average cost of food and other variable costs for each customer = $ 4.10
Income tax rate = 30%
Target net income = $114,800
(1) Contribution margin ratio:
= (Selling price - Variable price) ÷ Selling price
= ($ 8.20 - $ 4.10) ÷ $ 8.20
= 0.5
Income before tax:
= Net income ÷ (1 - Tax rate)
= $114,800 ÷ (1 - 0.3)
= $164,000
Desired revenue (dollars):
= (Fixed cost + Income before tax) ÷ Contribution margin ratio
= ($451,000 + $164,000) ÷ 0.5
= $1,230,000
(2) Customers are needed to break even:
= Fixed cost ÷ contribution per unit
= $451,000 ÷ ($8.20 - $4.10)
= $451,000 ÷ $4.10
= 110,000 customers
