Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Oriole Inn is a restaurant that specializes in southwestern style meals in a moderate price range. George Robinson, the manager of Oriole, has determined

The Oriole Inn is a restaurant that specializes in southwestern style meals in a moderate price range. George Robinson, the manager of Oriole, has determined that during the past two years the sales mix and contribution margin ratio of its offerings have been as follows:

Percent of Total Sales

Contribution Margin Ratio

Appetizers

10% 60%

Main entrees

60% 30%

Desserts

10% 50%

Beverages

20% 80%

George is considering a variety of options to try to improve the restaurants profitability. Her goal is to generate a target operating income of $145,600. The company has fixed costs of $1,235,000 per year.

A) George 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 drop the contribution margin ratio on the main entrees to 10% by reducing 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:

Percent of Total Sales

Contribution Margin Ratio

Appetizers

20% 60%

Main entrees

30% 10%

Desserts

10% 50%

Beverages

40% 80%

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 if Georges changes are implemented.

Appetizers

$enter a dollar amount

Entrees

$enter a dollar amount

Desserts

$enter a dollar amount

Beverages

$enter a dollar amount

Total sales

$enter a total sales amount

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

Expert Fraud Investigation A Step By Step Guide

Authors: Tracy Coenen

1st Edition

0470387963, 978-0470387962

Students also viewed these Accounting questions