Cliff runs a restaurant in a small town known for its theatres and tourist attractions. Cliff charges an average of $18 per meal. He estimates his variable costs to be $6 per meal and fixed costs are $12,000 per month. Cliff has the capacity to serve 2,000 meals per month. At full capacity, what is Cliff's net income?

Question

Quizplus · Accepted Answer

Net income can be calculated by subtracting total costs from total revenue. Total revenue at full capacity (2,000 meals at $18 each) is $36,000. Total variable costs are $6 per meal, so for 2,000 meals, that's $12,000. Adding the fixed costs of $12,000, total costs are $24,000. Subtracting total costs ($24,000) from total revenue ($36,000) gives a net income of $12,000.

Cliff Runs a Restaurant in a Small Town Known for Its