The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.75. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 36%. Target net income is $117,600.

Requirements

1. Compute the revenues needed to earn the target net income.

2. How many customers are needed to break even? To earn net income of $117,600?

3. Compute net income if the number of customers is 170,000.

Requirement 1. Compute the revenues needed to earn the target net income.

Using the equation method, select the basic formula used to compute the revenues needed to earn the target net income.

Tax Rate/ Contribution Margain/fixed cost/revenues/targert income/tax rate/variable cost

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Tax Rate/ Contribution Margain/fixed cost/revenues/targert income/tax rate/variable cost

-

Tax Rate/ Contribution Margain/fixed cost/revenues/targert income/tax rate/variable cost

=

Tax Rate/ Contribution Margain/fixed cost/revenues/targert income/tax rate/variable cost

/

Tax Rate/ Contribution Margain/fixed cost/revenues/targert income/tax rate/variable cost

The revenues needed to earn the target net income is $

.

Requirement 2. How many customers are needed to break even? To earn net income of $117,600?

Determine the formula that is used to compute how many customers are needed to break even, then compute the number of customers needed.

1-tax rate/contribution per customer/fixed costs/sales check per customer/tagert net income/tax rate/total revenue/variable costs per customer

/

1-tax rate/contribution per customer/fixed costs/sales check per customer/tagert net income/tax rate/total revenue/variable costs per customer

=

Customers needed to break even

/

=

Determine the formula that is used to compute how many customers are needed to earn net income of$117,600, then compute the number of customers needed.

1-tax rate/contribution per customer/fixed costs/sales check per customer /tagert net income/ tax rate/total revenue /variable costs per customer

/

1-tax rate/contribution per customer/fixed costs/sales check per customer/tagert net income/tax rate/total revenue/variable costs per customer

=

Customers needed to earn $117,600

/

=

Requirement 3. Compute net income if the number of customers is170,000. Determine the formula that is used to compute the net income when the number of customers is 170,000,

then compute the net income.

change in net income/ contribution margin/fixed costs/original target net income/ total revenue/ variable costs	+	change in net income/ contribution margin/fixed costs/original target net income/ total revenue/ variable costs	=	Net income
	+		=