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 bus $250 a month.A small bucket of take-out chicken,the only menu item,is priced at $9.50.Unit variable costs for the bucket of chicken are $5.50.At what level of sales of dollars of revenue will the restaurant break even?
A)$9,386.00
B)$9,500.00
C)$9,975.00
D)$19,925.00

Question

Quizplus · Accepted Answer

To break even, the total revenue must be equal to the total costs.

Total fixed costs = rent + utilities + interest + insurance + advertising = $2,500 + $500 + $750 + $200 + $250 = $4,200

Unit variable cost = cost per bucket of chicken = $5.50

Let's assume the number of buckets of chicken sold each month is x. Then the total revenue is 9.5x.

9.5x = 5.5x + 4,200

4x = 4,200

x = 1,050

Therefore, the restaurant needs to sell $9.5 x 1,050 = $9,975 worth of buckets of chicken each month to break even. So the correct answer is option C.

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