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    spongebob21's Avatar
    spongebob21 Posts: 7, Reputation: 1
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    #1

    Sep 4, 2011, 07:34 AM
    CVP analysis
    The express banquet has two restaurants that are open 24- hours a day. Fixed costs for the two restaurants together total 459,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is 8.50. The average cost of food and other variable costs for each customer is 3.40. The income tax is 30 percent. Target net income is 107,100.

    1. Compute the revenues needed to ean the target net income.
    2. How many customers are needed to break even? To earn net income of 107,100?
    3. Comput net income if the number of customers is 170,000.

    Can someone explain this in detailed form?
    Unknown008's Avatar
    Unknown008 Posts: 8,076, Reputation: 723
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    #2

    Sep 4, 2011, 07:50 AM
    What did you not understand in my explanation? :(

    https://www.askmehelpdesk.com/financ...ng-595692.html
    spongebob21's Avatar
    spongebob21 Posts: 7, Reputation: 1
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    #3

    Sep 4, 2011, 10:24 AM
    This is what I did for part A.

    a. FC: 459,000 Inc tax: 30 %
    VC: 8.50-3.40=5.10 per customer rev
    TI: 107,1000

    That's how I started it however you are saying to add the 8.50 and 3.40 why is that I thought we would want to seee our profit and figure out how to get to 107,100. What do I do?
    Unknown008's Avatar
    Unknown008 Posts: 8,076, Reputation: 723
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    #4

    Sep 4, 2011, 10:49 AM
    a. I didn't tell you to add 3.4 and 8.5. I told you to find the difference between the revenue and the costs.

    I prefer working out all the costs first: 459000 + 3.4x
    Then the revenue: 8.5x

    Then the income: Revenue - Cost = 8.5x - (459000 + 3.4x) = 5.1x - 459,000

    Now, the net income should be 107,100. The income before tax is applied becomes, by proportion:
    70% = 107100
    100% = 107100/70 * 100 = 153,000

    So, the income equation becomes: 5.1x - 459,000 = 153,000

    Does that make sense to you?
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    spongebob21 Posts: 7, Reputation: 1
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    #5

    Sep 4, 2011, 11:05 AM
    Yes it is a little bit clearer so are you just going to have to guess for the number of customers like you did for the 100 customers to know you have a loss?
    Unknown008's Avatar
    Unknown008 Posts: 8,076, Reputation: 723
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    #6

    Sep 4, 2011, 11:15 AM
    Um... I changed that a bit. I thought initially that you were applying the income tax to the FC :eek:

    Now, you have to find x, the number of customers that you have to get in order to get the net income of 107,100 or gross income of 153,000. Can you find x, then find the revenue it represents?
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