The Smiths provide you with the following estimates:

Projected average revenue, including beverages and desserts $ 45 per meal

Average cost of food $ 15 per meal

Chef’s, waiters, and dishwasher salaries $ 5,100 per month

Rent (building and various equipment) $ 4,000 per month

Cleaning (both linen and premises) $ 800 per month

Replacement of dishes, cutlery, glasses, etc $ 300 per month

Utilities, advertising, and telephone $ 2,300 per month

In this problem, food is a variable cost and all other costs in this case are considered fixed... so should be able to determine the breakeven in number of meals..... and evolve from there!

YOU ARE REQUIRED to:

Identify for them the annual number of meals needed to breakeven and the sales revenue to breakeven.

Identify for them how many meals the Smiths must serve to make a profit of $ 75,600 (the desired profit level) in year One.

Identify THREE (3) major factors the Smiths should consider before they make their decision as to whether to open the restaurant or not.