Before franchising her HappyWok restaurantconcept, owner Mei Lai had made the following assumptions.

Lai believed people would pay $4.75 for a large bowl of noodles. Variable costs would be $ 1.90 a bowl creating a contribution margin of $2.85 per bowl.

MeiLai estimated monthly fixed costs for franchisees at $8,850. Franchisees wanted a minimum monthly operating income of $6,000.

Requirements:

1. What was the averagerestaurant's operating income before thesechanges?
2. Assuming that the price cut and advertising campaign are successful at increasing volume to the projectedlevel, will the franchisees still earn their target profit of $6,000 permonth? Show your calculations.