Question

A restaurant prepares 200.00 pizza slices and sells them at a rate of $10.00/slice. Expenses for the restaurant include raw material for pizza at $4.00 per slice, $100.00 for monthly rental and monthly insurance of $47.00. Lost sale are taken as $5.00 per unhappy customer. Leftover pizza can be sold for $2.00. The restaurant is open only for 25 days in a month. Today there was a party at nearby office so the demand for pizza went up to 217.00 slices. How much profit could the restaurant earn today?

Answer 1

Part 1

Restaurant’s profit = $1109.12

Total sale today = (200*10) = 2,000

Total material cost = (200* 4) = 800

Fixed cost per day = (100+47) / 25= 5.88

Lost sale expense = (217 -200)* 5 = 85

Profit for the day = 2000-800-5.88-85 = $1109.12

Part 2

Breakeven point =61 cups of coffee and muffin

Breakeven point = fixed expense / contribution margin per unit

Contribution margin per unit = selling price per unit – variable cost per unit = 9.18-5.18 = $4.00

Fixed expenses = 44+200 = 244

Breakeven point = 244/4 = 61 cups of coffee and muffin