The Carrollton Buffet offers an all-you-can-eat buffet meal for $30 per person. The restaurant employs ten salaried employees. Rent for the building, employee salaries, and other fixed costs for the restaurant are $143,000 per month when the restaurant serves meals to up to 14,000 guests in that month. If the restaurant were to serve more than 14,000 guests in any given month, it would need to hire two additional servers and two additional kitchen staff for an additional fixed cost of $22,000 per month. The variable cost of food is $15 per guest.
Requirements
1. What is the restaurant's cost equation for estimating costs if the number of guests to be served is up to 14,000 guests per month?
2. If the restaurant were to serve 13,000 guests in May, what would be the:
a. Estimated total cost? (Use the cost equation from Requirement 1.)
b. Average cost per guest?
3. If the restaurant were to serve 11,000 guests in June, what would be the:
a. Estimated total cost using the cost equation from Requirement 1?
b. Estimated total cost using the average per guest cost from Requirement 2b?
c. Why is there a difference in the two cost estimates?
4. What is the restaurant's cost equation for estimating costs if the number of guests to be served is more than 14,000 guests per month?
5. If the restaurant were to serve 15,000 guests in July, what would be the estimated total cost? (Use the cost equation from Requirement 4.)