In: Finance
A Restaurant is open only for 25 days in a month.
Expenses for the restaurant include raw material for each
sandwich at $5.00 per slice, $1,209.00 as monthly rental and
$210.00 monthly as insurance. They consider the cost of lost sales
as $6.00 per item. They are able to sell any leftover sandwiches
for $3. They prepares 200.00 sandwiches and sells them at a rate of
$13.00/sandwich.
Today there was a party at nearby office so the demand for
sandwiches rose to 227.00. How much profit did the restaurant earn
today?
Solution:
As per the information given in the question we have
No. of sandwiches prepared per day = 200
Sale price per sandwich = $ 13.00
Thus total sales per day = 200 * $ 13 = $ 2,600
Raw material cost per sandwich = $ 5
Thus total raw material cost per day = 200 * $ 5 = $ 1,000
As per the Information given in the question we have
Demand for sandwiches = 227 ; Sandwiches actually prepared = 200 ;
Cost of lost sales = $ 6
Hence cost of Lost sales per day = ( Demand for sandwiches – Sandwiches actually prepared ) * Cost of lost sales
= ( 227 – 200 ) * $ 6
= 27 * $ 6
= $ 162
Thus cost of lost sales per day = $ 162
As per the Information given in the question we have
Monthly rental = $ 1,209 ; Monthly Insurance = $ 210
No. days the restaurant is open in a month = 25
Thus total Fixed cost per month = Monthly rental + Monthly Insurance
= $ 1,209 + $ 210 = $ 1,419
Fixed cost per day = Total Fixed cost per month / No. days the restaurant is open in a month
= $ 1,419 / 25 = $ 56.76
Thus we have
Total Sales per day = $ 2,600 ; Raw material cost per day = $ 1,000 ;
Cost of lost sales per day = $ 162 ; Fixed cost per day = $ 56.76
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.
= $ 2,600 - $ 1,000 - $ 162 - $ 56.76
= $ 1,381.24
Thus the profit earned by the restaurant today = $ 1,381.24
= $ 1,381 (when rounded off to the nearest dollar)