Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ONLY NEED PART C at the bottom answered Problem 20-3A (Part Level Submission) The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in

ONLY NEED PART C at the bottom answered

Problem 20-3A (Part Level Submission)

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 Total Sales Contribution Margin Ratio Appetizers 15 % 60 % Main entrees 50 % 25 % Desserts 10 % 70 % 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 $ 120,000 . The company has fixed costs of $ 1,264,000 per year.

[Collapse question part]

(a)

[Correct answer.] 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 e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)

Total restaurant sales $ [Entry field with correct answer]

Sales from Each Product Appetizers $ [Entry field with correct answer] Main entrees $ [Entry field with correct answer] Desserts $ [Entry field with correct answer] Beverages $ [Entry field with correct answer]

SHOW SOLUTION SHOW ANSWER LINK TO TEXT

Attempts: 1 of 3 used

[Collapse question part]

(b)

[Correct answer.] Your answer is correct.

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 $585,000. At the same time, he is proposing to change the sales mix to the following.

Percent of Total Sales Contribution Margin Ratio Appetizers 25 % 60 % Main entrees 25 % 10 % Desserts 10 % 70 % Beverages 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 e.g. 10.251 and final answers to 0 decimal places, e.g. 2,510.)

Total restaurant sales $ [Entry field with correct answer]

Sales from Each Product Appetizers $ [Entry field with correct answer] Main entrees $ [Entry field with correct answer] Desserts $ [Entry field with correct answer] Beverages $ [Entry field with correct answer]

SHOW SOLUTION SHOW ANSWER LINK TO TEXT

Attempts: 1 of 3 used

[Collapse question part]

(c)

[Incorrect answer.] Your 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 $ [Entry field with incorrect answer]

Sales from Each Product Appetizers $ [Entry field with incorrect answer] Main entrees $ [Entry field with incorrect answer] Desserts $ [Entry field with incorrect answer] Beverages $ [Entry field with incorrect answer]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Audit Regulations Audit Market Structure And Financial Reporting Quality Foundations And Trends R In Accounting

Authors: Christopher Bleibtreu, Ulrike Stefani

1st Edition

1680839004, 978-1680839005

More Books

Students also viewed these Accounting questions

Question

d. What language(s) did they speak?

Answered: 1 week ago