Please help!!! This is due at 11:40 and I\'m struggling to solve the problem. It
ID: 2546473 • Letter: P
Question
Please help!!! This is due at 11:40 and I'm struggling to solve the problem. It would mean a lot, thank you so much.
Problem 6-3A The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Paul Weld, the manager of Grand, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows. Percent of Total Sales 15% 50 % 10% 25 % Contribution Margin Ratio 70% 25 % 80 % 80 % Appetizers Main entrees Desserts 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 $116,000. The company has fixed costs of $1,417,000 per year Your answer is incorrect. Try again. 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 Appetizers Main entreesExplanation / Answer
Solution:
The question is related with the sales mix.
We need to calculate first the weighted average contribution margin, then we can reply all the questions:
Weighted Average Contribution Margin
% of total sales
Contribution Margin
Weighted Avg Contribution Margin
(A)
(B)
(A*B)
Appetizers
15%
70%
10.50%
Main entrees
50%
25%
12.50%
Desserts
10%
80%
8.00%
Beverages
25%
80%
20.00%
Weighted Average Contribution Margin Ratio
51.00%
Part 1
Target Net Income = $116,000
Fixed Costs = $1,417,000
Weighted Avg Contribution Margin = 51%
Total Restaurant Sales to achieve target net income = (Total Fixed Cost + Target Income) / WA Cont Margin
= ($1,417,000 + $116,000) / 51%
= $3,005,882
Total Restaurant Sales = $3,005,882
% of total sales
Total Restaurant Sales
Sales for Each Product
(A)
(B)
(A*B)
Appetizers
15%
$3,005,882
$450,882
Main entrees
50%
$3,005,882
$1,502,941
Desserts
10%
$3,005,882
$300,588
Beverages
25%
$3,005,882
$751,471
Total
$3,005,882
Part 2 ---
Weighted Average Contribution Margin
% of total sales
Contribution Margin
Weighted Avg Contribution Margin
(A)
(B)
(A*B)
Appetizers
25%
70%
17.50%
Main entrees
25%
10%
2.50%
Desserts
10%
80%
8.00%
Beverages
40%
80%
32.00%
Weighted Average Contribution Margin Ratio
60.00%
Target Net Income = $116,000
Fixed Costs = $1,417,000 + increase 585,000 = $2,002,000
Weighted Avg Contribution Margin = 60%
Total Restaurant Sales to achieve target net income = (Total Fixed Cost + Target Income) / WA Cont Margin
= ($2,002,000 + $116,000) / 60%
= $3,530,000
Total Restaurant Sales = $3,530,000
% of total sales
Total Restaurant Sales
Sales for Each Product
(A)
(B)
(A*B)
Appetizers
25%
$3,530,000
$882,500
Main entrees
25%
$3,530,000
$882,500
Desserts
10%
$3,530,000
$353,000
Beverages
40%
$3,530,000
$1,412,000
Total
$3,530,000
Part 3 --- It is not clear. Can you please provide the full text and data for this part.
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Weighted Average Contribution Margin
% of total sales
Contribution Margin
Weighted Avg Contribution Margin
(A)
(B)
(A*B)
Appetizers
15%
70%
10.50%
Main entrees
50%
25%
12.50%
Desserts
10%
80%
8.00%
Beverages
25%
80%
20.00%
Weighted Average Contribution Margin Ratio
51.00%