ACM, Inc, operates a restaurant in the Washington, DC metropolitan area. The restaurant serves a wide range of customers but caters to young working professional with a single selection American cuisine menu. However, the single selection changes daily. The restaurant operates Monday through Saturday from 11:00am to 8:00pm and serves lunch and dinner only. The lunch portion is currently priced at $10 per meal and the dinner meal price is $16. Non-alcoholic beverages are included in the meal price. Alcoholic beverages are only sold at dinner at cost. The restaurant has the capacity to seat 125 persons. There is no delivery or carryout service currently available for customers.

Average Daily Data for the month Ended September 2014.

	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday
Lunch meals served	450	800	600	850	700	600
Dinner Meals Served	500	750	800	1100	1600	1250
Alcoholic Drinks Served	250	400	350	500	800	700

The costs of meal ingredients are $6.00 for lunch portions and $8.00 for dinner portions. The costs of non-alcoholic beverages are $1 per meal. Roughly half of all dinner meals are served with two alcoholic beverages at a cost of $5.00 per drink.

The restaurant employs 2 managers, 6 wait staff, 4 cooks and 3 greeter. Each manager receives $2,500 per month in salary. The remaining workers are paid $10 per hour worked. For every hour of operation, there is one manager, 3 wait staff, 2 cooks and 1 greeter on duty.

Other Operation costs

	Amount Paid	Frequency
Cleaning and Maintenance	$3,500	Weekly
Space Rent	$11,000	Monthly
Restaurant Utilities	$2,500	Monthly
Security	$1,200	Monthly
Website Hosting and Maintenance	$500	Monthly
Other Restaurant supplies (menus, linen)	$250	weekly

ACM, Inc. acquired kitchen equipment and furnishings from another company several years ago. The equipment is now fully depreciated. The equipment is insured at an annual cost of $12,000. Current marketing and advertising costs average $1,500 per month.

Relevant Assumptions:

-The mix of lunch to dinner is constant

-Each month has 4 weeks

Based on the information provided,

1. Compute breakeven for restaurant in September, in meals and in revenue dollars.

2. Compute the margin of safety in September in meals.

3. What effect does a pay raise increase for employees and managers have on the current breakeven point?

4. If the average customer spends about 40minutes dining at the restaurant during a typical visit, does the restaurant need to be concerned about overcapacity? If so, on what days and during which meal periods?

5. In an effort to increase customer during the lunch period, the restaurant is considering reducing the lunch price by 10%. This change could increase the lunch volume by as much as 20%. Is this a good move?