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Breakeven Point
2) You are thinking of closing your restaurant on Sunday which is open from 10am-10pm. Your prior
sales and costs for this day are:
- 3 wait staff @ $2.13/hour
- 2 kitchen staff @ $15/hour
- CoGS = 35% (assume this accounts for all of your variable costs)
- Average check = $8
- Number of covers = 50
Should you close the store on Sunday?
- Labor Cost = (12*2.13*3) + (12*15*2) = $436.68
- Revenue = 50*$8 = $400
- Contribution Margin = $400*(1-.35) = $260
How many covers would you have to do to make it worth your while?
- CM per customer = ($8*(1-.35) = $5.20
- Total Costs to Cover (labor) = $436.68
- $436.68/$5.2 = 84 covers
Is this enough to stay open?
3) Dean Michael Johnson is thinking about opening Mac’s café on Sunday. He has the following sales
projections and related costs.
Sunday Noon-10pm
2 Kitchen staff @ $12/hour each (staffed during entire time Mac’s is open)
1 Manager @ $20/hour (staffed entire time mac’s is open)
Utilities = $100 (for Sunday)
CoGS = 32% (assume these are only variable costs)
Number of Covers Sunday = 50 Average check = $6
A) What’s your breakeven point in number of covers for Sunday?
(fixed costs)/(CM per unit) = 540/(.68)(6) = 132.3 = 133 covers
B) Based on the figures above, would you recommend that Mac’s stay open on Sunday?
Mac’s should not stay open because the number of covers is more than twice the number it
normally takes. Mac’s can’t even cover all of its fixed costs for the revenue of $300.
C) Besides an economic incentive/disincentive to stay open or closed, what are two other factors
involving different stakeholders that may influence your decision?
a. Want to attract as many customers as possible. If you are closed you’re turning away
potential loyal customers
b. Could be a luxury provided. For example a restaurant in a hotel need to always be open
b/c it’s a luxury they offer to all of their guests.
RevPASH
Breakeven
If hiring another employee would allow you to sell 1000 more hotdogs per month. What is the most you
would pay him/her? [(6)(.75)](1000) = $4,500 (max you would pay)