There are several pricing strategies that can be deployed and one of the basic strategies is to charge a mark-up on the cost price of the item and quote accordingly. For pricing lunch specials, one option can be to determine the cost of preparing the lunch including the cost of the supplies, labor (both chef and assistants) costs, administrative costs and others (Assoc, 2002). From the accounting records, the data relevant to the costs can be derived and accordingly, the cost of each lunch special can be estimated. Depending on its intention to penetrate the market or practice the market skimming approach, the company can charge a markup and accordingly, price its menu offerings. These costs must also be analyzed to examine the scope of decreasing them by increasing efficiency in operations.
To determine whether it is profitable to open an hour early, the restaurant must first estimate its expected volume of sales in the hour and determine the contribution of the incremental sales by deducting the variable costs from the sales revenue. Here, the fixed costs won’t be considered as they are of the type sunk costs and are irrelevant in this decision making (Drury, 2007). These costs would be incurred irrespective of whether the restaurant opens early or not. If the contribution of the extra hour is positive, the restaurant should operate in that hour as the positive contribution would boost the overall profitability of the company.