Question

A restaurant prepares 200.00 pizza slices and sells them at a rate of $14.00/slice. Expenses for the restaurant include raw material for pizza at $6.00 per slice, $120.00 for monthly rental and monthly insurance of $27.00. Lost sale are taken as $6.00 per unhappy customer. Leftover pizza can be sold for $2.00. The restaurant is open only for 25 days in a month. Today there was a party at nearby office so the demand for pizza went up to 218.00 slices. How much profit could the restaurant earn today?

Answer 1

To calculate the profit the restaurant could earn today given the increased demand for 218 pizza slices, we need to consider the revenues, expenses, and losses.

### Given Data:
1. **Selling Price per Slice**: $14.00
2. **Cost of Raw Material per Slice**: $6.00
3. **Monthly Fixed Rental**: $120.00
4. **Monthly Insurance**: $27.00
5. **Cost of Lost Sales (for unsatisfied customers)**: $6.00 per slice
6. **Selling Price of Leftover Pizza**: $2.00
7. **Total Pizza Slices Prepared**: 200 slices
8. **Demand for Pizza Today**: 218 slices
9. **Days Open in a Month**: 25

### 1. Calculate Revenue:
- **Slice Sold**: The restaurant can sell up to the number of slices it prepared, which is 200 slices (cannot sell 218 as only 200 are prepared).
- **Total Revenue**:
\[
\text{Total Revenue} = \text{Number of Slices Sold} \times \text{Selling Price per Slice} = 200 \times 14 = 2800.00
\]

### 2. Calculate Expenses:
- **Raw Material Cost** for 200 slices:
\[
\text{Raw Material Cost} = \text{Number of Slices Prepared} \times \text{Cost of Raw Material per Slice} = 200 \times 6 = 1200.00
\]
- **Fixed Costs** (Rental + Insurance):
\[
\text{Fixed Costs} = 120 + 27 = 147.00
\]
- **Total Expenses**:
\[
\text{Total Expenses} = \text{Raw Material Cost} + \text{Fixed Costs} = 1200.00 + 147.00 = 1347.00
\]

### 3. Calculate Lost Sales:
Since the demand exceeds supply (218 slices demanded vs. 200 slices supplied), there are 18 unhappy customers:
- **Loss from Lost Sales**:
\[
\text{Loss from Lost Sales} = \text{Number of Unhappy Customers} \times \text{Cost of Lost Sales} = 18 \times 6 = 108.00
\]

### 4. Total Profit Calculation:
- **Total Profit**:
\[
\text{Total Profit} = \text{Total Revenue} - \text{Total Expenses} - \text{Loss from Lost Sales}
\]
\[
\text{Total Profit} = 2800.00 - 1347.00 - 108.00 = 1345.00
\]

### Conclusion:
The restaurant could earn a profit of **$1345.00** today.