<p>Question on Breakeven</p><p>The Scenario</p><p>The Bella Capri runs as an Italian restaurant that specialises in freshly prepared cooked meals. </p><p>It is located in premises on a main street of town with seating capacity for 45 customers. </p><p> The lease on the premises is £250 per week.  Business rates are a further £150 each week.  Light, heat and fuel are expected to be £40 per week.  Wage costs for three staff (cook and two waiters) should be £600 per week including all other employment costs.  The restaurant has set their prices so that it is possible to buy a meal for around £16 per head on average.  The cost of the ingredients would be no more than £4 per head.</p><p>What will be the breakeven for the Bella Capri?</p><p>1. Work it out using a formula </p><p>Contribution (£) = Selling Price minus Variable Costs</p><p>Break Even = Fixed Costs (£) Contribution per Unit (£)</p><p>2. Fill in a table, and put it on a graph Answer</p><p>Breakeven by formula</p><p>Contribution (£) = £16 (Selling Price) minus £4 (Variable Costs) = £ 12</p><p>Break Even = Fixed Costs (£) Contribution per Unit (£)</p><p>Fixed Costs per week Lease £ 250.00 Council Tax £ 150.00 Light, heat and fuel £ 40.00 Wages £ 600.00 £ 1,040.00 </p><p>Break Even (Units) = £1,040 = 87 units £ 12 The basis for the formula is: Fixed costs (£) Selling price (£) – variable costs per meal (£)</p><p>Completing a table helps you to draw a breakeven graph:</p><p>Breakeven by graph Number of Meals Sold 0 100 200 300 400 500 Sales £ 0 1600 3200 4800 6400 8000 Fixed Costs £ 1040 1040 1040 1040 1040 1040 Variable Costs £ 0 400 800 1200 1600 2000</p><p>[See diagram of graph Bella Capri’s breakeven from Word for answer]</p>