Case - Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in the Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maitre d'. The restaurant would serve dinner Tuesday through Saturday.
Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat four. Tables can be moved together for a large party. Linda is planning two seatings per evening, and the restaurant will be open 50 weeks per year.
The Homs have drawn up the following estimates:
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Average revenue, including beverages and desert
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$ 45 per meal
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Average cost of food
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$ 15 per meal
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Chef's and dishwasher's salaries
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$ 61,200 per year
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Rent (premises, equipment)
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$ 4,000 per month
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Cleaning (lines and premises)
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$ 800 per month
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Replacement of dishes, cutlery, glasses
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$300 per month
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Utilities, advertising, telephone
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$ 2,300 per month
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Requirements - Compute the annual breakeven number of meals and sales revenue for the restaurant. Also compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year. How many meals must the Homs serve each night to earn their target income of $75,600? Should the couple open the restaurant?