Question

Expenses for a Pizza restaurant include raw material for pizza at $4.00 per slice, $102.00 as monthly rental and $24.00 monthly as insurance. Lost sale expense is considered to be $4.00 per unhappy customer. Leftover Pizza can be sold for $3. The restaurant is open 25 days in a month.

Today the restaurant prepared 200.00 pizza slices and sells them for $12.00/slice. There was a party at a nearby office so the demand for pizza went up to 216.00 slices. How much profit did the restaurant earn today?

Answer 1

Answer :

We have that,

Restaurant sold 200 pizza slices at a price of $12 each

Total revenue = 200 * $12 = $2,400

Total revenue for today is $2,400

Raw material cost $4 per slice of pizza

Total raw material cost = 200 * $4 = $800

Monthly fixed cost = $102 + $24 = $126

Fixed cost per day = $126 / 25 = $5.04

Demand for pizza went upto 216 instaed of 200. Loss sale expenses is considered to be $4 per unhappy customer.

Lost sale expenses = ( 216 - 200 ) * $4 = $64

Therefore,

Profit earned today = Total revenue earned today - Raw material cost - Fixed cost per day - Lost sale expenses

= $2,400 - $800 - $5.04 - $64 = $1530.96

Profit earned today = $1531