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What is the breakeven level of revenue for the restaurant

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Question - An owner plans to invest $150,000 in a new business. Of this amount, $75,000 will be for equipment and the remainder used for working cash. Her estimates for the first year of business are as follows:

The average food costs 36% of its revenue.

Variable wages are expected to be 32% of revenue.

Liquor expense is expected to be 18% of revenue.

Fixed wages are expected to be $80,000.

The rent is $2,300 per month.

Insurance will be $15,300 for a three year policy.

It is estimated the equipment will last for 15 years.

Interest on loans is 5.5% on a balance of $40,000.

The owner wants a 20% return on her investment.

The business will have a 23% income tax rate.

Required -

a) What is the breakeven level of revenue for the restaurant?

b) How much revenue is needed to provide the owner with her desired rate of return?

Reference no: EM132968696

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