Problem 4 The Blue Ridge Café's budget for next year indicates the following: $765,000 Revenues Total fixed costs Total variable costs Total Costs Net income before tax $ 91,000 $512,000 $603,000 $162,000 Revenue estimates assume 89,470 guests will be served. a. What is the guest check average? b. What are the variable costs per guests? c. How many guests must be served for the Blue Ridge Café to break even? d. If the owner needed a net income of at least $114,000, how many guests would need to be served? e. How many more guests are needed to generate a net income of $114,000 than are needed to break even? f. If the Blue Ridge Café decides to close during two months that traditionally generate slow business, it will lose about 18,000 guests. If the owner chooses to do this, what will be the new net income or loss? g. The manager is considering a kitchen renovation that will add $7,500 in new fixed costs (depreciation and interest) each year. How much will the café's net income (loss) be if it does this during the first year that it closes for two months? (See Question F above.) h. The Blue Ridge Café closes for two months (Question F), incurs the additional fixed costs (Question G), and is the "victim" of a problem in the economy that results in a 14-percent increase in variable costs. How many additional guests are needed for it to maintain its net income level (Question G)?
Problem 4 The Blue Ridge Café's budget for next year indicates the following: $765,000 Revenues Total fixed costs Total variable costs Total Costs Net income before tax $ 91,000 $512,000 $603,000 $162,000 Revenue estimates assume 89,470 guests will be served. a. What is the guest check average? b. What are the variable costs per guests? c. How many guests must be served for the Blue Ridge Café to break even? d. If the owner needed a net income of at least $114,000, how many guests would need to be served? e. How many more guests are needed to generate a net income of $114,000 than are needed to break even? f. If the Blue Ridge Café decides to close during two months that traditionally generate slow business, it will lose about 18,000 guests. If the owner chooses to do this, what will be the new net income or loss? g. The manager is considering a kitchen renovation that will add $7,500 in new fixed costs (depreciation and interest) each year. How much will the café's net income (loss) be if it does this during the first year that it closes for two months? (See Question F above.) h. The Blue Ridge Café closes for two months (Question F), incurs the additional fixed costs (Question G), and is the "victim" of a problem in the economy that results in a 14-percent increase in variable costs. How many additional guests are needed for it to maintain its net income level (Question G)?
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 6P
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Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
100%
Do problem 4 F through H
![a. What will be the fixed
b. Assuming the owner wants to maintain the original "bottom line" profit (incon
[profit] before taxes) of $70,000, how much in revenues will remain to be spent on var
able costs?
c. Assuming the owner is willing to break even on the restaurant's operation, how muc
in revenues will remain to be spent on variable costs?
Problem 4
The Blue Ridge Café's budget for next year indicates the following:
$765,000
Revenues
Total fixed costs
Total variable costs
Total Costs
Net income before tax
$91,000
$512,000
$603,000
$162,000
Revenue estimates assume 89,470 guests will be served.
a. What is the guest check average?
b. What are the variable costs per guests?
c. How many guests must be served for the Blue Ridge Café to break even?
d. If the owner needed a net income of at least $114,000, how many guests would need to
be served?
e. How many more guests are needed to generate a net income of $114,000 than are
needed to break even?
f.
If the Blue Ridge Café decides to close during two months that traditionally generate
slow business, it will lose about 18,000 guests. If the owner chooses to do this, what
will be the new net income or loss?
g. The manager is considering a kitchen renovation that will add $7,500 in new fixed
costs (depreciation and interest) each year. How much will the café's net income (loss)
be if it does this during the first year that it closes for two months? (See Question F
above.)
h. The Blue Ridge Café closes for two months (Question F), incurs the additional fixed
costs (Question G), and is the "victim" of a problem in the economy that results in a
14-percent increase in variable costs. How many additional guests are needed for it to
maintain its net income level (Question G)?
Problem 5
The Anytown Restaurant has recorded the following financial information:
Food costs
Labor costs
All other costs (including fixed costs)
Net income (profit)
Number of mont
$365,000
$315,000
$224,000
$76.000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6a2f95ed-7171-45b2-9304-9328ccddc530%2F5ac40745-5eb9-4c09-8968-a839b5949082%2Fy5s8j8_processed.jpeg&w=3840&q=75)
Transcribed Image Text:a. What will be the fixed
b. Assuming the owner wants to maintain the original "bottom line" profit (incon
[profit] before taxes) of $70,000, how much in revenues will remain to be spent on var
able costs?
c. Assuming the owner is willing to break even on the restaurant's operation, how muc
in revenues will remain to be spent on variable costs?
Problem 4
The Blue Ridge Café's budget for next year indicates the following:
$765,000
Revenues
Total fixed costs
Total variable costs
Total Costs
Net income before tax
$91,000
$512,000
$603,000
$162,000
Revenue estimates assume 89,470 guests will be served.
a. What is the guest check average?
b. What are the variable costs per guests?
c. How many guests must be served for the Blue Ridge Café to break even?
d. If the owner needed a net income of at least $114,000, how many guests would need to
be served?
e. How many more guests are needed to generate a net income of $114,000 than are
needed to break even?
f.
If the Blue Ridge Café decides to close during two months that traditionally generate
slow business, it will lose about 18,000 guests. If the owner chooses to do this, what
will be the new net income or loss?
g. The manager is considering a kitchen renovation that will add $7,500 in new fixed
costs (depreciation and interest) each year. How much will the café's net income (loss)
be if it does this during the first year that it closes for two months? (See Question F
above.)
h. The Blue Ridge Café closes for two months (Question F), incurs the additional fixed
costs (Question G), and is the "victim" of a problem in the economy that results in a
14-percent increase in variable costs. How many additional guests are needed for it to
maintain its net income level (Question G)?
Problem 5
The Anytown Restaurant has recorded the following financial information:
Food costs
Labor costs
All other costs (including fixed costs)
Net income (profit)
Number of mont
$365,000
$315,000
$224,000
$76.000
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