The Express Banquet has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $459,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $8.50. The average cost of food and other variable costs for each customer is $3.40. The income tax rate is 30%. Target net income is $107,100.

Required:

1. Compute the revenues needed to earn the target net income.
2. How many customers are needed to break even?
3. How many customers are needed to earn a net income of $107,100?
4. Compute net income if the number of customers is 170,000.

To determine the revenues needed to earn the target net income at The Express Banquet's restaurants, we calculate the required revenue by accounting for fixed costs, targeted net income, and the tax rate, as well as determine the break-even point and targeted customers. For 170,000 customers, we calculate the net income considering sales and costs per customer, fixed costs, and taxes.

Explanation:

To solve this business scenario for The Express Banquet that has two restaurants, we first need to calculate the required revenues to earn the target net income. Using the formula:

Required Revenue = Fixed Costs + Target Net Income / (1 - Tax Rate) + Variable Costs.

Plugging in the given values: $459,000 (Fixed Costs) + $107,100 / (1 - 0.30) + Variable Costs.

Since average sales check per customer is $8.50 and the cost per customer is $3.40, we can calculate the break-even point and targeted customer count as follows:

Break-Even Point (BEP) = Fixed Costs / (Sales - Variable Costs per unit)

BEP = $459,000 / ($8.50 - $3.40) = 100,000 customers

Target Revenue = ($459,000 + $107,100 / (1 - 0.30)) / ($8.50 - $3.40) = 131,999 customers (rounded to whole number).

For 170,000 customers:

Net Income = (Number of Customers * (Sales per Customer - Variable Cost per Customer)) - Fixed Costs - Taxes

Net Income = (170,000 * ($8.50 - $3.40)) - $459,000 - 0.30 * ((170,000 * $8.50) - $459,000 - (170,000 * $3.40))

Calculate the Net Income from this to determine profitability. Here we have taken into consideration both the fixed costs and the variable costs to determine the revenues needed, number of customers to break even, and to achieve the target net income.

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