Question

Al Spray recently opened Al's Bar in the University District. Because of licensing​ restrictions, the only liquor he can sell is beer. The average price of beer at Al's Bar is ​$3.00 per​ glass, and each glass costs Al an average of $ 2.00. Al has hired a bartender and waiter at $ 4 comma 500 and $ 500 per​ month, respectively. His​ rent, utilities, and other fixed operating costs are $ 2 comma 000 per month.If Al sells only​ beer, how many glasses of beer does he have to sell each month to make a monthly profit of 10​% of​ sales? ​(

Answer 1

If sale is 100% the,

sale	100%
variable cost	66.67%
contribution margin	33.33%
fixed cost	23.33%
profit	10%

Variable cost = 100 x 2 / 3

                        = 66.67%

Contribution margin = 100 – 66.67

                                     = 33.33%

Fixed cost = 33.33% - 10%

                  = 23.33%

Profit = 10% of sale

sale	30,000
variable cost	20,000
contribution margin	10,000
fixed cost	7,000
profit	3,000

Fixed cost = salary of bartender + salary of waiter + rent, utilities and other fixed cost

                   = 4,500 + 500 + 2,000

                   = 7,000

Profit = 7,000 x 10 / 23.33

          = 3,000

Contribution margin = 7,000 + 3,000

                                     = 10,000

Variable cost = 10,000 x 66.67 / 33.33

                        = 20,000

Sale = 10,000 + 20,000

        = 30,000

AL has to sale 10,000 of bear glass to earn 10% profit of the sale