Question
You have the following projections about the costs in a family restaurant for next year: Net income required: 15% after income tax on the owners
You have the following projections about the costs in a family restaurant for next year: Net income required: 15% after income tax on the owners present investment of $80,000, income tax rate is 28%. Depreciation: Present book value (consolidated) of furniture and equipment is $76,000, depreciation rate is 20%. Interest: Interest on a loan outstanding of $35,000 is 8%. Known Costs Variable Costs Insurance $ 3,000 Food cost, 36% of sales revenue License 2,500 Wage cost, 38% of sales revenue Utilities 8,400 Other costs, 12% of sales revenue Maintenance 3,600 Administration 9,800 Salaries 41,600 a. What sales revenue would the restaurant have to achieve next year in order to acquire the desired net income after tax? b. What is the required average check needed to achieve the annual revenue objective if the restaurant is open 365 days, had 60 seats, and had an average seat turnover of 2.5 times per day?
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