A local authority runs a restaurant for its workers, which must atleast break on a year by year basis. During the last financial year, the costs of providing a meal in its restaurant were as follows:-
Variable cost per meal:
Food sh 45
Fuel sh 15
Annual fixed costs.
Wages: Sh.3,600,000
Other overheads Sh.2,400,000
Average meal price Sh. 72
Number of meals sold 700,000
Capacity (cereals) 825,000
For the next financial year, it is anticipated that the cost of food per meal will rise to Sh.50, fuel to Sh.16, wages will increase to Sh.3,800,000 and other overheads to Sh.2,500,000
Required:
The catering manager needs to know:
i) How many meals must be sold to break even?
”ii) From the Information in (i) above give an insight into the situation of rut;
Restaurant and how it can be solved, (13 marks
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