P9.8 A restaurant's average monthly income statement is as follows: Sales Revenue Food sales revenue $40,000 Beverage sales revenue 10,000 Total Sales Revenue $50,000 Cost of Sales Food (42% of food revenue) $16,800 Beverage (30% of beverage revenue) 3,000 Total Cost of Sales ( 19,800) Gross Margin $30.200 Operating Expenses Wages expense $13.600 Operating supplies expense 4,000 Administration & general expense 2.600 Advertising & promotion expense 1.800 Repairs & maintenance expense 900 Utilities expense 1,300 Depreciation expense 700 Interest expense 600 Total Operating Expenses (25,500 Operating Income $ 4,700 The owner is considering two possible alternatives for the coming year: "Alternative 1: By improving purchasing and reducing portions, cutting the food cost from 42% to 37% food sales revenue. There would be no other changes. Alternative 2: Cutting the food costs from 42% to 37% of food sales revenue and spending an additional $2,000 a month on advertising. It is estimated that the advertising would bring in extra customers and in- crease the volume of both food and beverage sales revenue by 20% over current levels. The extra customers would also incur extra costs over current levels as follows: Wages $2,000 Supplies 800 Administration 200 Repairs 300 Utilities costs 100