Before franchising her Global Wok restaurant concept, owner Sue Lo had made the following assumptions. (Click the icon to view the assumptions.) (Click the icon to view more informatic Requirements Read the 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 $8,300 per month? Show your calculations. Requirement 1. What was the average restaurant's operating income before these changes? Identify the formula labels and compute the operating income before the changes. Contribution margin per unit $ 4.90 Average sales volume units 7,500 Contribution margin $ 36,750 Less: Fixed expenses 7,800 $ 28,950 Operating income Print Done Requirement 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 $8,300 per month? Show your calculations. Identify the formula labels and compute the operating income after the changes. X Variable expenses Contribution margin Less: Operating income More info - - X More info Lo believed people would pay $7.00 for a large bowl of noodles. Variable costs would be $2.10 a bowl creating a contribution margin of $4.90 per bowl. Sue Lo estimated monthly fixed costs for franchisees at $7,800. Franchisees wanted a minimum monthly operating income of $8,300. Lo did franchise her restaurant concept. Because of Global Wok' success, Tasty Noodles has come on the scene as a competitor. To maintain its market share, Global Wok will have to lower its sales price to $6.50 per bowl. At the same time, Global Wok hopes to increase each restaurant's volume to 8,000 bowls per month by embarking on a marketing campaign. Each franchise will have to contribute $600 per month to cover the advertising costs. Prior to these changes, most locations were selling 7,500 bowls per month. Print Done Print Done