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Gilman's Caf is a popular restaurant in a local tourist town. Sarah Gilman, who opened the restaurant five years ago, has seen it grow steadily.

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Gilman's Caf is a popular restaurant in a local tourist town. Sarah Gilman, who opened the restaurant five years ago, has seen it grow steadily. Currently, Gilman's is only open for dinner, but many of her regular customers have been asking Sarah to consider opening for lunch as well. Sarah has been talking to her accountant about the financial impact of the expanded services on the overall business She knew that the cafe did not make much money and she was concerned that the new business might be too risky. The accountant asked her for her best estimates on the impact of the new business on revenues and costs. She had been thinking about this for some time and estimates that revenues would grow by about 25 percent. Food costs would increase by about 40 percent and labor costs by about 20 percent. Her rent would not change, but utilities would increase by about 25 percent. Other costs would increase by 15 percent. The salary she pays herself as manager of the cafe would not change. A few days later, her accountant stops by with the following estimated income statement assuming she adds the lunch business. Required: a-1. Prepare an income statement. a-2. Based on the financial impact, should Sarah open the cafe for lunch? b. Are there other factors she should consider? Gilman's Cato Annual Income Statement Lunch Threr Service Dinner Serv.co Only Sales revenue $ 765,000 Costs Food costs 252.000 Labor 246,000 Reli 68.000 Uite 56,590 Other costs 40,910 Masager's Salary 76,000 Total costs $ 739.440S Operating proft loss $ 25 560

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