Question 6 (25 marks)

Love Restaurant Limited is planning to open for business in 2022. It plans to sell a meal for $600. The company prepared the following budget for 2022:

Number of meals expected to be sold	40,000
Variable cost per meal Fixed Costs			$200
Annual Rent Expense			$1,260,000
Advertising			$ 40,000
Wages and salaries			$2,500,000

Required:

1. Prepare Love Restaurant Limited Budgeted Contribution Income Statement for 2022.

(5 marks)

1. How many meals will Love Restaurant Limited have to sell in 2022 in order to break even? (3 marks)

1. Calculate Love Restaurant Limited expected break-even point in sales dollars for

2022. (3 marks)

1. If Love Restaurant Limited wants to earn a profit before taxation of $6,000,000, how many meals must be sold in order to earn this profit before taxation? (3 marks)

1. If a new strain of the Corona Virus emerges in 2022 it is expected that sales will decline due to lockdowns. How much can sales decline in units (meals) without Love

Restaurant Limited incurring a loss? (3 marks)

1. Assume that the company hires a part time sales person to promote the new restaurant on social media and pays the person a fixed amount of $60,000 for 2022.
   1. How much must sales increase in terms of dollars to maintain the company's budgeted net profit before tax for 2022 in (a) above?(4 marks)

1. How much will the break even in meals increase or decrease if the company hires the part time sales person to promote the new restaurant.

(4 marks)