Thai Restaurant

Said and Lina live in Bayan Lepas. Two years ago, they visited Thailand. Lina, a professional chef was

impressed with the cooking method and the spices used in the Thai food. Both of them decided to open

one Thai restaurant with a new concept. Lina would supervise the cooking and Said would leave his

current job to be the maître d’. The restaurant would serve dinner Tuesday through Saturday.

Said has noticed a restaurant for rent. The restaurant has seven tables, each of which can seat four.

Tables can be moved together for a large party. Lina is planning two seatings per evening and the

restaurant will be open 50 weeks per year.

Said and Lina have drawn up the following estimates:

Average revenue, including beverages and dessert RM45 per meal

Average cost of food RM12 per meal

Chef’s and dishwasher’s salaries RM61,200 per year

Rent (premises, equipment) RM4,000 per month

Cleaning (linen and premises) RM800 per month

Replacement of dishes, cutlery and glasses RM300 month

Utilities, advertising and telephone RM2,300 per month

Requirements:

Compute the annual breakeven number of meals and sales revenue for the restaurant.

Also compute the number of meals and the amount of sales revenue needed to earn operating income

of RM75,600 for the year.

How many meals must the restaurant serve each night to earn their target income of RM75,600? Should

both of them open the restaurant?

What are other issues which they need to consider?