Question
I need some help with this task: You have started a restaurant with your brother and your sister. At the end of the financial year
I need some help with this task:
You have started a restaurant with your brother and your sister. At the end of the financial year total sales revenue was $160,000 and net profit after tax was $20,000. Your sister has suggested that the profit made during the year should be used to redecorate the premises; but your brother suggested that the money should be used in purchasing a new woodfire oven, so you could start selling take away pizzas. They have approached you in order to help on deciding how the $20,000 should be allocated for the next financial year.
Your sister claims that if the $20,000 is used in redecorating the premises you could increase menu prices by 20%.
Your brother argues that if a new wood fire oven is purchased, the restaurant would be able to sell at least 150 pizzas per month for at least $15.00 each pizza (total cost per take away pizza $4.50).
What project would you choose? Why? How would you convince your shareholders that your choice is the right priority for the allocation of the $20,000? (12 marks)
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