The owner of Brooklyn Restaurant is disappointed because the restaurant has been averaging 4,000 pizza sales per month, but the restaurant and wait staff can make and serve 6,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.25. Monthly fixed costs (for example, depreciation, property taxes, business license, and manager's salary) are $6,000 per month. The owner wants cost information about different volumes so that he can make some operating decisions. Requirements Requirement 1. Fill in the chart to provide the owner with the cost information he wants. Then use the completed chart to help you answer the remaining questions. (Round total variable costs to the nearest dollar. Round costs per pizza, price per pizza, and profit per pizza to the nearest cent.) Monthly pizza volume 3.000 4.000 6.000 Requirements Total fixed costs Total variable costs Total costs Fixed cost per pizza 1. Fill in the chart to provide the owner with the cost information he wants. Then use the completed chart to help you answer the remaining questions. 2. From a cost standpoint, why do companies such as Brooklyn Restaurant want to operate near or at full capacity? 3. The owner has been considering ways to increase the sales volume. He believes he could sell 6,000 pizzas a month by cutting the sales price from $6.00 a pizza to $5.50. How much extra profit (above the current level) would he generate if he decreased the sales price? (Hint: Find the restaurant's current monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.) Variable cost per pizza Average cost per pizza Sales price per pizza $ 6.00 $ 6.00 $ 6.00 Print Done Average profit per pizza Requirement 2. From a cost standpoint, why do companies such as Brooklyn Restaurant want to operate near or at full capacity? Companies want to run at full capacity to better utilize the resources they spend on V costs. The more units they produce, the the cost per unit. Requirement 3. The owner has been considering ways to increase the sales volume. He believes he could sell 6,000 pizzas a month by cutting the sales price from $6.00 a pizza to $5.50. How much extra profit (above the current level) would he generate if he decreased the sales price? (Hint Find the restaurant's current monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.) Identify the profit formula and compute the monthly profit at the current and the new volume. Monthly profit 4,000 pizzas 6,000 pizzas Since the restaurant will generate of $, the owner should the sales price to the volume. Choose from any list or enter any number in the input fields and then continue to the next question. Music by Design produces student-grade violins for beginning violin students. The company produced 2,800 violins in its first month of operations. At month-end, 700 finished violins remained unsold. There was no inventory in work in process. Violins were sold for $114.00 each. Total costs from the month are as follows: E: (Click on the icon to view the data.) The company prepares traditional (absorption costing) income statements for its bankers. Music by Design would also like to prepare contribution margin income statements for his own management use. Requirements Compute the following amounts that would be shown on these income statements: Requirement 1. Gross profit Identify the formula, and then compute the gross profit. Gross profit Data Table Requirements Requirement 2. Contribution margin Identify the formula, and then compute the contribution margin. Direct materials used. 136,400 Contribution margin Direct labour. 50,000 Variable manufacturing overhead 32,000 Compute the following amounts that would be shown on these income statements: Requirements 1. Gross profit 2. Contribution margin Total expenses shown below the gross profit line 4. Total expenses shown below the contribution margin line 5. Dollar value of ending inventory under absorption costing 6. Dollar value of ending inventory under variable costing Which income statement has a higher operating income? By how much? Explain. Fixed manufacturing overhead 70,000 Requirement 3. Total expenses shown below the gross profit line 11,000 Variable selling and administrative expenses ..... Fixed selling and administrative expenses ...... 13,000 = Total expenses below the gross profit line Print Done Print Done Requirement 4. Total expenses shown below the contribution margin line = Total expenses below the contribution margin line Requirement 5. Dollar value of ending inventory under absorption costing The dollar value of ending inventory under absorption costing is $ Requirement 6. Dollar value of ending inventory under variable costing The dollar value of ending inventory under variable costing is $ Which income statement has a higher operating income? By how much? Explain. The will have a higher operating income by $. Under absorption costing Under variable costing, these costs are Choose from any list or enter any number in the input fields and then continue to the next