Hult Espresso is a gourmet dessert restaurant in SF. Margie McMahon, the sole proprietor expanded to a second location in LA 3 years ago. Recently, McMahon decided to enroll in a PhD program and retire from active management of the individual restaurants but continues to oversee the entire company. She hired a manager for each restaurant. In 20x3, each had sales of $600,000. The LA restaurant is still pricing lower than the SF restaurant to establish a customer base. Variable expenses run 70% of sales for the SF restaurant and 75% of sales for the LA restaurant. Each manager is responsible for the rent and some other fixed costs for his or her restaurant that amounted to $55,000 for the SF restaurant and $37,500 for the one in LA. The difference is primarily due to lower rent in LA. In addtion, several costs, such as advertising, legal services, accounting, and personnel services, were centralized. The managers had no control of these expenses, but some of them directly benefited the individual restaurants. Of the $172,500 cost in this catergory, $50,000 related to SF and $92,500 to LA, where most of the additional cost in LA is due to the cost of extra advertising to build up its customer base. The remaining $30,000 was general corporated overhead, which is unallocable to each restaurant. Requirement 1. Prepare Income Statements for each restaurant and for the company as a whole. Use the following format that allows easy assessment of each manager's performance and each restaurant's economic performance. I/S. Contribution Approach. For the year ended 20x3 Revenues Less Variable costs = Contribution margin Less Fixed costs controllable by restaurant managers = Contribution controllable by restaurant managers Less Fixed costs controllable by others = Contribution by restaurant Less Unallocated costs Operating income Requirement 2. Evaluate the financial performance of each restaurant. Requirement 3. Evaluate the financial performance of each manager. Company SF LA