Reference no: EM133173310
Question - An owner invested $180,000 in a new family-style restaurant, of which $160,000 was immediately used to purchase equipment and $20,000 was retained for working cash. Estimates for the first year of business are as follows:
Menu selling prices to be established to give a markup of 150% over cost of food sold
Variable wages, 28% of sales revenue
Fixed wages, $51,600
Other variable costs, 7% of sales revenue
Rent, $36,000
Insurance, $4,800
Depreciation on equipment, 20%
Return on investment desired, 12%
Income tax rate, 30%
The restaurant has 60 seats and is open 5 days a week for lunch and dinner only. Lunch sales revenue is expected to be 40% of total volume with 2 seat turnovers. Dinner revenue will be 60% of total volume, with 1.25 turnovers.
Required - Calculate the average check per meal period that will cover all costs, including desired return on investment.
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