Reference no: EM132536388
Question - Jimmy recently opened a Pub. Due to licensing restrictions, the only liquor he can sell is beer. The average price of a glass of beer is L.L 3.00, and each glass costs Jimmy an average of L.L 2.20. Jimmy has hired a bartender and a waiter at L.L 3,000 and L.L 2,000 per month, respectively. His rent, utilities, and other fixed operating costs are L.L 5,000 per month.
Jimmy is considering selling hamburgers for lunch to increase his daytime business. He would like to sell the hamburger for L.L 1.25 each. Jimmy will buy buns for L.L 1.20 a dozen and ground beef for L.L 2.80 per pound. Each pound of ground beef will yield seven hamburgers and other ingredients will cost L.L 0.20 per hamburger. In addition, Jimmy will have to hire a part-time cook at L.L 1,200 per month and will run an additional fixed cost of L.L 360 per month.
Analyze the information above and to assist to decide the followings
a. How many beers must he sell to generate a monthly profit of L.L 5,000?
b. How many beers must he sell to generate a monthly profit equivalent to 8% of sales?
c. Assuming there are no effects on beer sales. How many hamburgers does he need to sell each month to break even?
d. Suppose 2000 extra customers per month came for lunch because of the availability of the hamburgers and that each bought an average of 1.5 beers. What would be the added profit (or loss) generated by these extra customers?
e. Jimmy could charge L.L 2.00 per hamburger if he spends 50% more on higher quality ingredients. Explain to Jimmy whether a higher quality hamburger would be more profitable than the regular hamburger.
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