Before franchising her Happy Noodles restaurant concept, owner Lei Wong had made the following assumptions.

View the assumptions.

Read the requirements.

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.

$\backslash$table$[[$Contribution margin per unit,$42,000],[$Times: Breakeven point,$16,800],[$Contribution margin,$25,200],[$Less: $,$ Fixed expenses,$7,500],[$Operating income,$]]$

More information

Wong did franchise her restaurant concept. Because of Happy Noodles's success, Value Noodles has come on the scene as a competitor. To maintain its market share, Happy Noodles will have to lower its sales price to $$4\mathrm{.}75$ per bowl. At the same time, Happy Noodles hopes to increase each restaurant's volume to $8,000$ bowls per month by embarking on a marketing campaign. Each franchise will have to contribute $$400$ per month to cover the advertising costs. Prior to these changes, most locations were selling $7,500$ bowls per month.

Assumptions

Wong believed people would pay $$5\mathrm{.}25$ for a large bowl of noodles. Variable costs would be $$2\mathrm{.}10$ a bowl creating a contribution margin of $$3\mathrm{.}15$ per bowl. Lei Wong estimated monthly fixed costs for franchisees at $$7,500.$ Franchisees wanted a minimum monthly operating income of $$7,050.$