Reference no: EM132573131

Question - Jose Arnaz owns and operates a restaurant .His fixed costs are $10,500 per month. Luncheons and dinners are served. The average total bill (excluding tax and tip) is $7 per customer. Jose's present variable costs average $ 2.80 per meal.

Required -

i) How many meals must be served to attain a profit before taxes of $4,200 per month?

ii) What is Jose's break- even point in number of meals served per month?

iii) Jose's rent and his other fixed costs rise to a total of $14,700 per month. Assume that variable costs also rise to $ 3.75 per meal. If Jose increases his average price to $9, how many meals must he now serve to make $4,200 profit per month?

iv) Jose's accountant tells him he may lose 10% of his customers if he increases prices. If this should happen, what would be Jose's profit per month? Assume that Jose had been serving 3,500 customers per month.

v) Refer to data in requirement 4. To help offset the anticipated 10% loss of customers, Jose hires a guitarist to perform for 4 hours each night for $900 per month. Assume that this would increase the total monthly meals from 3,150 to 3,450. Would Jose's total profit change? By how much?