RJCBS COMM $2131$ W$24$ A$.$ Coish $2{?}^{nd}$ MIDTERM Mar $192024$

$(35\%)$ Bricktown Pub restaurant that specializes in classic East Coast fare in a

moderate price range. Debbie MacNeil, the manager of Bricktown, has determined that

during the past $2$ years the sales mix & contribution margin of its offerings were

Debbie is considering a variety of options to try to improve the restaurant's profitability.

Her goal is to generate a target operating income of $$155,000.$ The company has fixed

costs of $$400,000$ per year.

instructions

a$.$ Calculate the total restaurant sales and the sales of each product line that would be

necessary in order to achieve the desired target operating income.

b$.$ Debbie believes the restaurant could greatly improve its profitability by reducing the

complexity and selling prices of its entrees to increase the number of clients that it serves,

and by more heavily marketing its appetizers and beverages. She is proposing to reduce the

contribution margin on the main entrees to $15\%$ by dropping the average selling price. She

envisions an expansion of the restaurant that would increase fixed costs by $50\%.$ At the same

time, she is proposing to change the sales mix to the following:

Calculate the total restaurant sales, and the sales of each product line that would be

necessary in order to achieve the desired target operating income.

c Suppose that Debbie drops the selling price on entrees and increases fixed costs as

proposed in part $($b$),$ but customers are not swayed by her marketing efforts, and the product

mix remains what it was in part $($a$).$ Calculate the total restaurant sales and the sales of each

product line that would be necessary to achieve the desired target operating income.

d$.$ Comment on the potential risks and benefits of this strategy.