Queen owns and operates a restaurant, Mighty Ducks. His fixed costs are $21,000 per
month. He serves lunches and dinners. The average total bill (excluding tax and tip) is $19
per customer meal. Queen's present variable costs average $10.60 per meal.
REQUIRED:
a. What is the break-even point in number of meals served per month?
b. How many meals must he serve to attain a profit before taxes of $8,400 per month?
c. Queen's rent and other fixed costs rise to a total of $29,925 per month and variable
costs also rise to $12.50 per meal. Queen decides to raise his average price to $23. His
accountant, however, says that he will likely lose 10% of his customers. To offset the loss of
customers, Queen decides to hire a pianist to play 4 hours a night at a cost of $2,000 per
month. Assume that this will increase total monthly meals to 3,450. What will Queen's
profit be now?