George Webb Restaurant collects on the average $5 per customer at its breakfast & lunch diner.Its variable cost per customer averages $3,and its annual fixed cost is $40,000.If George Webb wants to make a profit of $20,000 per year at the diner,it will have to serve__________ customers per year.
A) 10,000 customers
B) 20,000 customers
C) 30,000 customers
D) 40,000 customers
E) 50,000 customers

Question

Quizplus · Accepted Answer

To calculate the required number of customers, we need to use the following formula:

Profit = (Revenue - Variable Cost) * Number of Customers - Fixed Cost

We know the profit that the diner wants to make, the variable cost per customer, and the fixed cost. We also know that the revenue per customer is $5.

Substituting these values in the formula, we get:

$20,000 = ($5 - $3) * N - $40,000

Solving for N (number of customers), we get:

N = ($20,000 + $40,000) / ($5 - $3)

N = 30,000

Therefore, the diner needs to serve 30,000 customers per year to make a profit of $20,000. Hence, the best choice is C) 30,000 customers.

George Webb Restaurant Collects on the Average $5 Per Customer