Expenses for a Pizza restaurant include raw material for pizza at $6.00 per slice, $101.00 as monthly rental and $49.00 monthly as insurance. Lost sale expense is considered to be $6.00 per unhappy customer. Leftover Pizza can be sold for $3. The restaurant is open 25 days in a month.

Today the restaurant prepared 200.00 pizza slices and sells them for $14.00/slice. There was a party at a nearby office so the demand for pizza went up to 223.00 slices. How much profit did the restaurant earn today?

1 answer

To calculate the profit for the pizza restaurant for the day, we will need to consider the total revenue, total costs, and any potential loss from unsold pizza slices.

1. Calculate Total Revenue: The restaurant sold 200 slices at $14.00 each:

\[ \text{Total Revenue} = \text{Number of slices sold} \times \text{Price per slice} = 200 \times 14 = 2800.00 \]

2. Calculate Total Costs:

  • Cost of raw materials: The cost for 200 slices at $6.00 per slice:

\[ \text{Cost of raw materials} = \text{Number of slices prepared} \times \text{Cost per slice} = 200 \times 6 = 1200.00 \]

  • Monthly rental cost: This is given as $101.00, and since we want to find the cost per day, we divide this by the number of days in a month (25):

\[ \text{Daily rental cost} = \frac{101}{25} = 4.04 \]

  • Monthly insurance cost: This is given as $49.00, and similarly divided by 25:

\[ \text{Daily insurance cost} = \frac{49}{25} = 1.96 \]

  • Total fixed costs (rental + insurance):

\[ \text{Total fixed costs} = 4.04 + 1.96 = 6.00 \]

  • Lost sale expense: The demand was for 223 slices, but only 200 slices were sold, so there were 23 unhappy customers. The cost for these unhappy customers is:

\[ \text{Lost sale expense} = \text{Number of unhappy customers} \times \text{Lost sale cost per customer} = 23 \times 6 = 138.00 \]

  • Total costs:

\[ \text{Total Costs} = \text{Cost of raw materials} + \text{Total fixed costs} + \text{Lost sale expense} = 1200.00 + 6.00 + 138.00 = 1344.00 \]

3. Calculate Profit:

\[ \text{Profit} = \text{Total Revenue} - \text{Total Costs} = 2800.00 - 1344.00 = 1456.00 \]

Therefore, the total profit the restaurant earned today is $1456.00.