Restaurant Angela is a catering company that serves food and beverages at parties and business functions.

Restaurant offers a standard cocktail party has estimated the cost per guest as follows:

Food & Beverage	$16
Labour ( 0.5 hour @$9.80/hour )	$4.90
Overhead (0.5 hour @$18.54/hour)	$9.27
Total cost per guest	$30.17

The standard cocktail party lasts three hours and Angela hires one worker for every six guests, so that works out to one and a half-hour of labour per guest. These workers are hired only as needed and are paid only for the hours they actually work. When bidding on cocktail parties, Angela adds a 14% mark-up to yield a price of about $32.00 per guest. She is confident about the estimates of the costs of food and beverages and labour but is not as comfortable with the estimate of overhead cost. The $18,54 overhead cost per labour hour was determines by providing total overhead expenses for the last 12 months by total labour-hour for the same period.

Monthly data concerning overhead costs and labour hours is as below:

Month	Labor Hour	Overhead Expenses
Jan	$2,200	$42,000
Feb	$2,500	$46,000
Mar	$2,700	$47,000
Apr	$3,900	$51,000
May	$4,200	$54,000
Jun	$5,200	$58,000
Jul	$6,200	$61,000
Aug	$7,200	$64,000
Sep	$6,700	$62,000
Oct	$4,200	$55,000
Nov	$3,800	$51,000
Dec	$6,200	$59,000
Total	$55,000	$650,000

The main problem: Angela has received a request to bid on a 160-guest fund-raising cocktail party to be given next month by an important local charity. (The party would last the usual three hours). The restaurant would like to win this contract because the guest list for this charity event includes many prominent individuals that she would like to land as future clients. Angela is confident that these potential customers would be favourably impressed by her companys services at the charity event.

Question:

• Separate the fixed and variable costs from the mixed costs.
• Determine the relevant costs for Break-even analysis:
  • Revenue
  • Variable costs
  • Contribution margin
  • Operating overheads
• Determine the Breakeven point of the companys.
• Determine the Safety Margin of the company during the 5 years.
• Determine the Degree of Operating Leverage. Give the implication of your findings.
• How is the company performing lately?
• Does the company have a prospect in the future?