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The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Paul Weld, the manager of Grand, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows. Percent of Contribution Total Sales Margin Ratio Appetizers 15% 60% Main entrees 50% 25% Desserts 10% 50% Beverages 25% 80% Paul is considering a variety of options to try to improve the profitability of the restaurant. His goal is to generate a target net income of $111,000. The company has fixed costs of $1,079,400 per year. (a) Your answer is correct. Calculate the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income. (Round intermediate calculations to 3 decimal places eg. 0.251 and final answers to decimal places, e.g. 2,510.) Total restaurant sales $ 2,560,000 Appetizers $ Main entrees $ Desserts $ Beverages $ Sales from Each Product 384000 1,280,000 256,000 640,000 e Textbook and Media Attempts: 2 of 10 used (b) Your answer is incorrect. Paul believes the restaurant could greatly improve its profitability by reducing the complexity and selling price of its entrees to increase the number of clients that it serves. It would then more heavily market its appetizers and beverages. He is proposing to reduce the contribution margin ratio on the main entrees to 10% by dropping the average selling price. He envisions an expansion of the restaurant that would increase fixed costs by $586,300. At the same time, he is proposing to change the sales mix to the following. Appetizers Main entrees Desserts Beverages Percent of Contribution Total Sales Margin Ratio 25% 60% 25% 10% 10% 50% 40% 80% Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income. (Round intermediate calculations to 3 decimal places eg. 10.251 and final answers to O decimal places, e.g. 2,510.) Total restaurant sales $ Sales from Each Product Appetizers $ Main entrees $ Desserts $ Beverages $ e Textbook and Media Attempts: 2 of 10 used Submit Answer Save for Later Last saved 1 second ago Saved work will be auto-submitted on the due date. Tour answer is incorrect. Try again. Suppose that Paul reduces the selling price on entrees and increases fixed costs as proposed in part (b), but customers are not swayed by the marketing efforts and the sales mix remains what it was in part (a). Compute the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income. (Round intermediate calculations to 3 decimal places e.g. 10.251 and final answers to 0 decimal places, e.g. 2,510.) Total restaurant sales 4008421 Sales from Each Product Appetizers 601263 Main entrees 2004211 $ Desserts 400842 $ Beverages 1002105 $ Show transcribed image text
