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Jack McDowell is the sole owner of McDowell's, a fast food restaurant modeled after a popular fast food chain. He is reviewing his financial results
Jack McDowell is the sole owner of McDowell's, a fast food restaurant modeled after a popular fast food chain. He is reviewing his financial results and has the following information: Sandwiches Served: 10,000 Total Food Sales: $110,000 (all sandwiches are the same price) Total Drink Sales: $20,000 (all drinks are the same price) Cost of Food: $47,500 (Jack is very careful so that all food purchased is sold, there is no inventory) . Cost of Drink: $2,000 (there is no excess of inventory of drinks) Commissions Paid: $13,000 (Employees share in a bonus pool based on sales) Monthly Rent & Occupancy Costs: $22,000 Monthly Salaries: $15,000 Monthly Advertising: $16,000 They are thinking of lowering the price for sandwiches (drinks would remain the same) to $10.00 per sandwich. They believe that units sold would increase to 15,000 He is not pleased with the results and requests the following information from you: Total Revenue Per Unit Total Variable Cost Per Unit Total Fixed Costs Contribution Margin Per Unit Current Net Income Current Break-Even in Units Current Units for Profit of $10,000 Break-Even in Units With New Selling Price and Units Sold New Net Income With New Price and Units Sold Should McDowell's lower their selling price? Support your
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