The owner of a small restaurant that sells take-out fried chicken and biscuits pays $2,500 in rent each month, $500 in utilities, $750 interest on his loan, insurance premium of $200, and advertising on local buses $250 a month.A bucket of take-out chicken is priced at $9.50.Unit variable costs for the bucket of chicken are $5.50.How many small buckets of chicken does the restaurant need to sell to break-even each month?
A)988 buckets
B)1,000 buckets
C)1,050 buckets
D)3,150 buckets
E)4,200 buckets

Question

Quizplus · Accepted Answer

To break even, the revenue must cover all the fixed costs and variable costs. The fixed costs are:
Rent + Utilities + Interest + Insurance + Advertising
= $2,500 + $500 + $750 + $200 + $250
= $4,200

The contribution margin per bucket of chicken is:
Price - Unit Variable Cost
= $9.50 - $5.50
= $4.00

To cover the fixed costs of $4,200, the restaurant needs to sell:
Fixed Costs / Contribution Margin per bucket
= $4,200/$4
= 1,050 buckets

Therefore, the restaurant needs to sell 1,050 small buckets of chicken to break-even each month.

The Owner of a Small Restaurant That Sells Take-Out Fried