A "Little Sis" Restaurant Has Been Opened as a Prototype

question 77

Multiple Choice

A "Little Sis" restaurant has been opened as a prototype to test the concept of a smaller facility with a limited menu.Experience during the first two years was as follows:
$$\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Annual volume } \\\text { (customer visits) }\end{array} & \begin{array} { c } \text { Total Cost } ( \$ ) \\\text { (fixed plus variable cost) }\end{array} \\\hline \text { Year 1 } & 40,000 & 600,000 \\\text { Year 2 } & 60,000 & 700,000 \\\hline\end{array}$$
The average sale is $10 per customer.Use the following partially completed graph to determine the break-even quantity graphically.Then refine your solution by solving it algebraically.(Show your work for credit.)

• A) The break-even quantity is fewer than or equal to 30,000 customer visits.
• B) The break-even quantity is more than 30,000 customer visits and fewer than or equal to 50,000 visits.
• C) The break-even quantity is more than 50,000 visits and fewer than or equal to 70,000 visits.
• D) The break-even quantity is more than 70,000 customer visits.

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Definitions:

Capital Lease

A leasing arrangement in which the lessee records the leased asset as if it was a purchase, reflecting it on their balance sheet as an asset and a corresponding liability.

Lease Inception

The point in time at which a lease agreement is initiated or executed between the lessor and the lessee.

Capital Lease

A lease classified as a purchase by the lessee, allowing for the asset and liability to be recorded on the balance sheet.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, recognizing the decrease in value over time.