Problem 19-3A restaurant t in Flagstaff, Arizona. tt e as folows style meals ina
ID: 2509491 • Letter: P
Question
Problem 19-3A restaurant t in Flagstaff, Arizona. tt e as folows style meals ina are as fol lows. moderate nd, has the last 2 ribution its offeri Percent of Main entrées Desserts Beverages Total Sales 15% 50% 10% 25% in Ratic 70% 25% 70% 80% 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 $117,000. The company has fixed costs of $1,362,000 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 e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Total restaurant sales Sales from Each Product Main entrees Desserts BeveragesExplanation / Answer
Problem - 19-3A
Calculate the overall contribution margin = 0.15 * 70 + 0.5 * 25 + 0.10 *70 + 0.25 * 80 = 50%
Total sales = [ Target profit + Fixed cost ] / overall contribution margin = [ 117000 + 1362000 ] / 0.50
= 1479000 / 0.50 = 2958000
Total restaurant sales = $ 2,958,000
Sales for each product
Note : Above values for each product are obtained by multiplying the total restaurant sales 2958000 with repective sales mix percentages ....... 15%, 50%, 10% and 25%
Question - 2
Overall contribution margin (or) composite contribution margin
= 0.25 * 70 + 0.25 * 10 + 0.10 * 70 + 0.40 * 80 = 59%
Target Income = 117000
Fixed cost = 1362000 + increase of 585000 = 1947000
Total sales required = [ Target Income + Fixed cost ] / Contribution margin
= [ 117000 + 1947000 ] / 0.59
= 3,498,305
Sale from each product
Question - 3
Overall contribution margin = 0.15 * 70 + 0.50 * 10 + 0.10 * 70 + 0.25 * 80 = 42.5%
Total sales of restaurant = = 4,856,471
Target Income = 117000
Fixed cost = 1362000 + increase of 585000 = 1947000
Total sales required = [ Target Income + Fixed cost ] / Contribution margin
= [ 117000 + 1947000 ] / 0.425
= 4856471
Sales of each product
Appetizers 443700 Main entrees 1479000 Desserts 295800 Beverages 739500