Jacqui Giraud owns and operates a restaurant. Her fixed costs are $21,000 per month. She serves luncheons and dinners. The average total bill (excluding tax and tip) is $19 per customer. Giraud’s present variable costs average $10.60 per meal.
1. How many meals must she serve to attain a profit before taxes of $8,400 per month?
2. What is the break-even point in number of meals served per month?
3. Giraud’s rent and other fixed costs rise to a total of $29,925 per month and variable costs also rise to $12.50 per meal. If Giraud increases her average price to $23, how many meals must she serve to make $8,400 profit per month?
4. Assume the same situation described in requirement 3. Giraud’s accountant tells her she may lose 10 percent of her customers if she increases her prices. If this should happen, what would be Giraud’s profit per month? Assume that the restaurant had been serving 3,500 customers per month.
5. Assume the same situation described in requirement 4. To help offset the anticipated 10 percent loss of customers, Giraud hires a pianist to perform for four hours each night for $2,000 per month. Assume that this would increase the total monthly meals from 3,150 to 3,450. Would Giraud’s total profit change? By how much?
