Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Zell Dintch recently invested 325,000.00 to acquire the Rock Oyster, a restaurant on Boracay Island. Rock Oyster meals sell for an average of 30.00 and

image text in transcribedimage text in transcribed
Zell Dintch recently invested 325,000.00 to acquire the Rock Oyster, a restaurant on Boracay Island. Rock Oyster meals sell for an average of 30.00 and the average variable cost per meal is 12.00 Zell believes that by reducing newspaper advertising, he can reduce fixed costs by 10% from their current level of 12,000.00 per annum. Other fixed costs amount to 100.000.00 per annum. The current income tax rate is thirty percent.84. A new marketing program is expected to stimulate sales by 10.00% but will require additional fixed costs on advertisement by 8,000.00. What will be its net effect on income or loss of the company, assuming pretax profit last year is equal to 50,000.00? (ignore reduction of newspaper advertising costs) a. Net income will increase by 8,200.00 b. Net income will decrease by 15,000.00 c. Net income will increase to 8,200.00 d. Net income will decrease to 35,000.00 85. To induce customers to patronage the restaurant, Zell has decided to grant its employees a 2.00% commission for every meal serve to a satisfied customer. Upon dining with the restaurant, the customer will accomplish a feedback form to rate whether they were contended with the service provided by the waiter or waitress assigned on their table. Suppose the marketing program is a success and all customers gives positive feedbacks, ignoring the reduction of newspaper advertising costs, what is the new breakeven point in number of meals must be serve in order to arrive at a post tax income of 17.500.00? a. 7,183.91 c. 6,363.64 b. 7,873.56 d. 7,127.77

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

Intermediate Accounting Volume 2

Authors: Thomas Beechy, Joan Conrod, Elizabeth Farrell, Ingrid McLeod-Dick

6th Edition

1259105482, 9780071338820

More Books

Students also viewed these Accounting questions