2. You have the following annual information about Moonlight Bar and Grill, which consists of three different operating segments.

Moon light Barandgrill Incomestatement For the Year ended December 31, 2020
	dining room	Bar Area	outdoor Patio	total
Sales Revenue	$206,900	$156,800	$186,000	$549,700
Direct Costs	164,000	145,000	152,000	461,000
Contribution Income	$42,900	$11,800	$34,000	88,700
Indirect Costs				63,000
Operating Income				$25,700

The owner wants to allocate indirect costs to each area based on square footage, to analyze how each segment of the restaurant is performing. The dining room is 3,300 square feet, the bar area is 1,500 square feet and the outdoor patio is 1,200 square feet.

required

1. Allocatethe indirect costsasindicated.

Moonlight Bar and grill
Income statement
For the Year ended December 31, 2020
	dining room	Bar Area	outdoor Patio	total
Sales Revenue	$206,900	$156,800	$186,000	$549,700
Direct Costs	164,000	145,000	152,000	461,000
Contribution Income	42,900	11,800	34,000	88,700
Indirect Costs*				63,000
Operating Income				$25,700

1. Theowneroftherestauranthasanofferfromasmoothieshoptorentthebarareafor$7,000peryear. Rentdoesnotincludeanyoftheindirectcosts;theywillhavetobeabsorbedby theothersegments. Preparearevisedincomestatementandadvisetheownerifthisifanacceptableoffer ornot.

Moonlight Bar and grill
Income statement for
FortheYearended December31,2020
Sales Revenue
Direct Costs
Contribution Income
Indirect Costs
Income before Rent
Rental Income
Operating Income

1. Therestaurantownertookanother lookatthevariousindirectcostsand, onfurtheranalysis, discoveredthat some indirect costswould change,as shown below.

	Current IndirectCosts	Costs if Bar Arearented
Administrative Expense	$32,000	$29,000
Advertising Expense	12,000	8,000
Insurance Expense	6,000	4,200
Repairs Expense	3,000	2,300
Utilities Expense	10,000	7,500
total	$63,000	$51,000

If the bar area is not operated, it is estimated that outdoor patio sales revenue will decrease by 30% and direct costs will decrease by $20,000. Dining room sales revenue and direct costs will not be impacted. Prepare a revised income statement. With this new information, should the owner accept the offer?

Moonlight Bar and grill
Income statement
For the Year ended December 31, 2020
	diningroom	outdoor Patio	total
Sales Revenue
Direct Costs
Contribution Income
Indirect Costs
Income before Rent
Rental Income
Operating Income

Please solve each step and give us an explanation for understanding it more.