The owner of Snooker's Restaurant is contemplating keeping the dining room open for one additional hour each night. She has determined that this would incur additional labor costs of $220. and $20. in additional costs for heat, light, and power. The restaurant's variable rate is .4. What level of dollar sales volume will be required to break even for this additional hour?

Question

Quizplus · Accepted Answer

To break even, the restaurant needs to cover the additional costs ($220 for labor and $20 for utilities, totaling $240) with the revenue from sales. Given the variable rate of .4 (or 40%), this means that 40% of the sales revenue goes towards variable costs. To find the sales volume needed to break even, divide the total additional costs by the complement of the variable rate (1 - 0.4 = 0.6). Thus, $240 / 0.6 = $400.

The Owner of Snooker's Restaurant Is Contemplating Keeping the Dining