Before franchising her Oodles of Noodles restaurant concept, owner Yuning Zhu had made the following assumptions.

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 $7,150 per month? Show your calculations. Zhu believes people will pay $7.00 for a large bowl of noodles. Variable costs would be $2.45 a bowl creating a contribution margin of $4.55 per bowl. Yuning Zhu estimated monthly fixed costs for franchisees at $7,800. Franchisees wanted a minimum monthly operating income of $7,150. Since franchising Oodles of Noodles, the restaurant has not been very successful due to The Noodle Company coming on the scene as a competitor. To increase its market share, Oodles of Noodles will have to lower its sales price to $6.50 per bowl. At the same time, Oodles of Noodles hopes to increase each restaurant's volume to 5,000 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 4,500 bowls per month