Refer to Global Chopsticks in E7-21A. Wong did franchise her restaurant concept. Because of Global Chopsticks' success, Noodles-n-More has come on the scene as a competitor. To maintain its market share, Global Chopsticks will have to lower its sales price to $5.25 per bowl. At the same time, Happy Wok hopes to increase each restaurant's volume to 6,500 bowls per month by embarking on a marketing campaign. Each franchise will have to contribute $400 per month to cover the advertising costs. Prior to these changes, most locations were selling 6,000 bowls per month.
Requirements
1. What was the average restaurant's operating income before these changes?
2. Assuming that the price cut and advertising campaign are successful at increasing volume to the projected level, will the franchisees still earn their target profit of $6,000 per month? Show your calculations.