You own a restaurant and just negotiated a decrease in the cost of steaks by 25 cents a steak. You normally sell 300,000 steak dinners a year. Your business pays an average of 30 percent in income taxes. What is the annual benefit of this increased efficiency?

Question

Quizplus · Accepted Answer

The annual benefit is calculated by multiplying the decrease in cost per steak (25 cents) by the number of steaks sold annually (300,000), which equals $75,000. After accounting for a 30% tax rate, the net benefit is $75,000 * (1 - 0.30) = $52,500.

You Own a Restaurant and Just Negotiated a Decrease in the Cost