Asked by Rosalie Maniquiz on Sep 22, 2024
Cliff runs a restaurant in a small town known for its theatres and tourist attractions. Cliff charges an average of $18 per meal. He estimates his variable costs to be $6 per meal and fixed costs are $12,000 per month. Cliff has the capacity to serve 2,000 meals per month. At full capacity, what is Cliff's net income?
A) $12,000
B) $10,000
C) $15,000
D) $7500
E) $14,500
Variable Costs
Costs that fluctuate with the level of production or sales volume, such as materials and labor.
Fixed Costs
Expenses that do not change in total regardless of changes in the volume of goods or services produced or sold.
- Determine the net income using specified revenue, cost, and price variables.
- Examine the impact of capacity utilization on profitability and the determination of break-even points.
Learning Objectives
- Determine the net income using specified revenue, cost, and price variables.
- Examine the impact of capacity utilization on profitability and the determination of break-even points.