Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Cullumber inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Paul Weld, the manager of

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
The Cullumber inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Paul Weld, the manager of Cullumber, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows. Sales mix is determined using total sales dollars. 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 $124,020. The compary has foced costs of $1,116,180 per year. 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 es. 0.251 and final answers to 0 decimal places, eg. 2,510.) Total restaurant sales 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 $620,100. At the same time, he is proposing to change the sales mix to the following. Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income $124,020. (Round intermediate calculations to 3 decimal places eg. 10.251 and final answers to 0 decimal places, es. 2,510) Total restaurant sales Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income $124,020. (Round intermediate calculations to 3 decimal ploces eg. 10.251 and final answers to 0 decimal ploces, eg. 2,510.) Suppose that Paul reduces the selling price on entrees and increases foxed 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 ploces es. 10.251 and final answers to 0 decimal places, es. 2,510.) Total restaurant sales

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

Financial Accounting Tools for Business Decision Making

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

5th Edition

9781118560952, 1118560957, 978-0470239803

More Books

Students also viewed these Accounting questions