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. What number of meals must be sold to generate a net income of $7,800?

Question

Quizplus · Accepted Answer

To find the break-even point or target profit point, we use the formula: (Fixed Costs + Target Profit) / (Selling Price per Unit - Variable Cost per Unit). Here, Fixed Costs = $12,000, Target Profit = $7,800, Selling Price per Unit = $18, and Variable Cost per Unit = $6. Plugging these into the formula gives: ($12,000 + $7,800) / ($18 - $6) = $19,800 / $12 = 1,650 meals.

Cliff Runs a Restaurant in a Small Town Known for Its