A group of 30 Lincoln students are returning from LakeTahoe on a ski trip.They stop offat a restaurant outside of Sacramento.This restaurant has a capacity of 800 meals per day. It currently serves 750 meals per day.
The dailyfixed costs are $1,200 per day.The main meal is a Caesar salad that sells for $9; the unit variable cost is $5 per salad.The student leader of the bus trip offers to bring the students into the restaurant, if the total payment for 30 meals could be $180. The restaurant owner refuses because he says that he would lose on average $0.60 per meal.
Please comment on the restaurant owner's reasoning. Is he correct? What would you show the restaurant owner to change his mind?