Question

A Restaurant is open only for 25 days in a month.

Expenses for the restaurant include raw material for each sandwich at $6.00 per slice, $1,004.00 as monthly rental and $470.00 monthly as insurance. They consider the cost of lost sales as $5.00 per item. They are able to sell any leftover sandwiches for $3. They prepares 200.00 sandwiches and sells them at a rate of $12.00/sandwich.
Today there was a party at nearby office so the demand for sandwiches rose to 226.00. How much profit did the restaurant earn today?

Answer 1

Solution:

As per the information given in the question we have

No. of sandwiches prepared per day = 200

Sale price per sandwich = $ 12.00

Thus total sales per day = 200 * $ 12 = $ 2,400

Raw material cost per sandwich = $ 6

Thus total raw material cost per day = 200 * $ 6 = $ 1,200

As per the Information given in the question we have

Demand for sandwiches = 226 ; Sandwiches actually prepared = 200   ;

Cost of lost sales = $ 5

Hence cost of Lost sales per day = ( Demand for sandwiches – Sandwiches actually prepared ) * Cost of lost sales

= ( 226 – 200 ) * $ 5

= 26 * $ 5

= $ 130

Thus cost of lost sales per day = $ 130

As per the Information given in the question we have

Monthly rental = $ 1,004   ; Monthly Insurance = $ 470

No. days the restaurant is open in a month = 25

Thus total Fixed cost per month = Monthly rental + Monthly Insurance

= $ 1,004 + $ 470 = $ 1,474

Fixed cost per day = Total Fixed cost per month / No. days the restaurant is open in a month

= $ 1,474 / 25 = $ 58.96

Thus we have

Total Sales per day = $ 2,400   ;    Raw material cost per day = $ 1,200   ;

Cost of lost sales per day = $ 130   ; Fixed cost per day = $ 58.96

Thus the profit made by the restaurant per day is calculated as follows :

Profit = Total Sales per day – Raw material cost per day – cost of lost sales per day – Fixed cost per day.

= $ 2,400 - $ 1,200 - $ 130 - $ 58.96

= $ 1011.04

Thus the profit earned by the restaurant today = $ 1011.04

= $ 1011 (when rounded off to the nearest dollar)