Problem
Sam's Sushi serves only a fixed-price lunch. The price of $9 and the variable cost of $4 per meal remain constant regardless of volume. Sam can increase lunch volume by opening and staffing additional check-out lanes. Sam has three choices:
|
Monthly Volume Range
(Number of Meals)
|
Total
Fixed Costs
|
|
1 Lane
|
0-5,000
|
$
|
26,000
|
|
|
2 Lanes
|
5,001-8,000
|
|
31,000
|
|
|
3 Lanes
|
8,001-10,000
|
|
36,600
|
|
Required:
a. Calculate the break-even point(s).
b-1. Calculate the profit (or loss) for each alternative, assuming Sam can sell all the meals he can serve.
b-2. Should Sam operate at one, two, or three lanes?