A restaurant is being planned that will require an investment of $150,000 in equipment by the owner. The following shows forecasted variable cost percentages, and identifiable known costs (considered fixed and semifixed costs at start-up).

a. What is the breakeven level of sales revenue for the restaurant? Prepare a contribution margin income statement to confirm the breakeven calculations.

b. What required sales revenue is needed if the owner wants an 18% operating income (before-tax) return on investment? Prepare a contribution margin income statement to confirm the CVP calculations.LO1

Transcribed Image Text:

Variable costs will be: Food cost is 38% of sales revenue Wage cost is 27% of sales revenue Other variable costs are 10% of sales revenue Other known costs will be: Management salary and wages expense $48,000 Insurance expense 2,800 Advertising expense 4,500 Utilities and telephone expense 3,000 Rent expense 21,600 Equipment depreciation expense 20%