Before franchising her Global Chopsticks restaurant concept, owner Shan Lo had made the following assumptions.

LoLo

believed people would pay

$ 5.75$5.75

for a large bowl of noodles. Variable costs would be

$ 2.30$2.30

a bowl creating a contribution margin of

$ 3.45$3.45

per bowl.

Shan LoShan Lo

estimated monthly fixed costs for franchisees at

$ 9 comma 000.$9,000.

Franchisees wanted a minimum monthly operating income of

$ 5 comma 700$5,700.

LoLo

did franchise her restaurant concept. Because of

Global ChopsticksGlobal Chopsticks'

success,

More NoodlesMore Noodles

has come on the scene as a competitor. To maintain its market share,

Global ChopsticksGlobal Chopsticks

will have to lower its sales price to

$ 5.25$5.25

per bowl. At the same time,

Global ChopsticksGlobal Chopsticks

hopes to increase each restaurant's volume to

8 comma 0008,000

bowls per month by embarking on a marketing campaign. Each franchise will have to contribute

$ 500$500

per month to cover the advertising costs. Prior to these changes, most locations were selling

7 comma 5007,500

bowls per month.

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

$ 5 comma 700$5,700

per month? Show your calculations.