What are the potential benefits of applying CVP analysis to business decision making?

What are the potential benefits of applying CVP analysis to business decision making?

restaurants until he decided to peruse his interest in health food and went to work with an obesity clinic. That was five years ago and Andrew is now ready to start his own restaurant for people at risk for obesity or just those who want to watch their calories. Though health food can fetch higher prices, Andrew has decided to keep his rates reasonable considering the socioeconomic profile of obesity sufferers and the location of his restaurant.

Andrew plans to serve only the main meals. His restaurant can seat 15 customers at a time. Both lunch and dinner will be available for two hours and a diner is expected to occupy a seat for about 1 hour. The restaurant will be open Monday through Friday of each week throughout the year except for the first two weeks of July when Andrew vacations with his family.

COST TO RUN

Average revenue, including juices (per meal)……… $ 42

Average cost of the food (per meal)……………………. $ 12

Chef’s and waiters’ salaries (per year)………………… $59,920

Rent (premises, equipment) (per month)…………. $ 4,200

Cleaning (linen and premises) (per month)…………… $ 840

Replacement of dishes, cutlery, glasses (per month) $ 300

Utilities, advertising, telephone (per month)…………… …$ 2,000

Explanation & Answer

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