As the Marketing director at the Mexican Taco Restaurant, it was my job to calculate the break-even point using the formula, state the problem and then articulate possible solutions to solve the problem. The break-even formula Total Fixed Cost (fixed costs and fixed expenses are those which do not change as volume changes) divided by the product's selling price minus its variable cost and expenses. (Variable costs and expenses increase as volume increases and they will decrease when volume decreases) Mexican Taco Restaurant Fixed Cost $5,600 ($2,000 lease, $500 electricity & $3,100 labor) Average order cost $7 Average order cost $3 Break-even point=$5,600/($7-$3)=$5,600/$4=1,400 The problem is, after a year of being in business, the restaurant …show more content…
The business needs to sell 1,400 before it can start making a profit. First, I would suggest ways to increase revenue; “a 2% increase in sales is equivalent to a 10% reduction in food cost”. (Allen, 2010) Because of price constraints, factors that limit the range of prices a firm may set, I’m suggesting other ways to increase revenue before increasing the price of the tacos. The goal is to create a demand for the tacos and then increase the price, generally, the greater the demand for a product, the higher the price that can be set. Host an in-house training, to give your servers a refresher on their sales skills and also get their opinion on some creative specials that can be offered to get people in the door. “The key is to innovative, the more you innovate and invent, the less you have to discount. The more you can do to create a one-of-a-kind customer experience, the more you can afford to charge and the more customers you can expect to see.” (Allen, 2010) Smart phones, apps and social media are the new fad for this generation. With a swipe or keystroke people can get and share information with their friends. I’m suggesting the owner invest in marketing programs like social media & mobile marketing to promote the