Question

Suppose that Sophia expects to serve 15 percent more meals in the next quarter. Unit variable costs are expected to remain unchanged. However, Sophia knows that if the restaurant serves over 5,500 meals in a quarter, she must hire an additional manager (part-time) at a cost of $6,450 for the quarter. Other fixed costs are expected to increase by 10 percent. Calculate the unit cost and the total cost if 5,750 meals are served next quarter

Answer 1

$87,975

15.30

Explanation:

The computation of unit cost and total cost is shown below:-

Managers' salary ($22,000 + $6,450) $28,450

Rent $18,000

Depreciation on equipment $2,000

Other fixed cost (3,000 × 1.1) 3,300

Total Fixed cost $51,750

Total Cost = $36,225 + $51,750

= $87,975

Unit Cost = 87,975 ÷ 5,750

= 15.30