Wellfood offers aspecial buffet luncheon at $18. Each luncheon generates a contribution margin of $6, and the current sales is at the breakeven point of 4,320 luncheons per annum. The restaurant manger is hoping to make a profit of $20,000 per annum on luncheons, and is prepared to spend $4,000 per annum on promotion to achieve the required sales level.

Required:

The manager believes that he could double the luncheon sales by lowering the price to $14. Would you advise the manager to do this? Why or why not? What other factors should be considered?