1. A market survey finds that if the sale prices are brought down by about 20%, the volume of sale can be doubled. Should the sale prices be lowered?

1. A market survey finds that if the sale prices are brought down by about 20%, the volume of sale can be doubled. Should the sale prices be lowered?

Contribution Margin Income Statement Sales Beer sales 40% $ 55% Food sales 781,200 1,074,150 97,650 Other sales 5% Total sales $ 1,953,000 Variable Costs Cost of goods sold Beer (15% of sales) Food (35% of sales) Other (33% of sales) Employee wages (25% of sales) Supplies (1% of sales) Utilities (3% of sales) Misc (2% of sales) Total Variable costs Contribution Margin 117,180 375,953 32,225 488,250 19,530 58,590 39,060 1,130,787 822,213 Fixed Costs Salaries: manager, chef, brewer Equip & building maintenance Advertising Other: cleaning, menus, misc. Admin: insurance and accounting Property tax Depreciation Interest on debt Total Fixed Costs Operating Profit 140,000 30,000 20,000 40,000 40,000 24,000 94,000 132,000 520,000 302,213