Answer :
Final answer:
To earn the target net income of $107,100, The Express Banquet needs to generate revenues of approximately $808,714.29. The break-even point is approximately 8,327 customers. If the number of customers is 170,000, the net income would be approximately $5,874,500.
Explanation:
Calculating Revenues Needed to Earn Target Net Income:
To calculate the revenues needed to earn the target net income, we can use the following formula:
Revenues = (Fixed Costs + Target Net Income) / (1 - Income Tax Rate)
Substituting the given values:
Revenues = ($459,000 + $107,100) / (1 - 0.30)
Revenues = $566,100 / 0.70
Revenues = $808,714.29
Calculating Break-Even Point:
The break-even point is the number of customers needed to cover all costs. To calculate the break-even point, we can use the following formula:
Break-Even Point = Fixed Costs / (Average Sales Check - Average Variable Costs)
Substituting the given values:
Break-Even Point = $459,000 / ($58.50 - $3.40)
Break-Even Point = $459,000 / $55.10
Break-Even Point ≈ 8,327 customers
Calculating Net Income:
To calculate the net income, we can use the following formula:
Net Income = (Number of Customers * Average Sales Check - Variable Costs per Customer) * (1 - Income Tax Rate) - Fixed Costs
Substituting the given values for 170,000 customers:
Net Income = (170,000 * $58.50 - $3.40) * (1 - 0.30) - $459,000
Net Income = ($9,945,000 - $578,000) * 0.70 - $459,000
Net Income ≈ $6,911,500 - $578,000 - $459,000
Net Income ≈ $5,874,500
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