Question

Danilo and his wife operate a restaurant where they sell all their meals for $13.00 each. the markup on each meal is $4.50 and overhead expenses are 19.00% of cost.

calculate the break-even price.

Answer 1

The break-even price for a meal at Danilo's restaurant is $10.115, calculated by subtracting the meal's markup from the selling price and then adding the overhead expenses, which are 19% of the meal production cost.

Step-by-step explanation:

To calculate the break-even price for Danilo's restaurant, we must first determine the cost to produce one meal. Given the information that the markup on each meal is $4.50, we can deduce that the selling price of $13.00 includes this markup. Therefore, the cost of producing one meal is $13.00 - $4.50 = $8.50.

Next, we consider the overhead expenses, which account for 19.00% of the cost. To find the amount of overhead per meal, we multiply the cost by the overhead percentage: $8.50 * 0.19 = $1.615. The total cost per meal, including overhead, therefore, is $8.50 + $1.615 = $10.115.

To achieve a break-even situation, Danilo's restaurant must sell each meal at the total cost of producing the meal, which includes both the meal production cost and the overhead expenses. Therefore, the break-even price for each meal would be $10.115; this is the minimum price they must charge per meal to cover all costs without making a profit or a loss.