Problem 19-3A The Grand Inn is a restaurant in Flagstaff, Arizona. It specialize
ID: 2579644 • Letter: P
Question
Problem 19-3A 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 60% 25 % 70 % 80% Appetizers Main entrees Beverages 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 $120,000. The company has fixed costs of S1,264,000 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 DessertsExplanation / Answer
19-3A) Calculate total restaurant sales :
Weighted average contribution margin = (60%*15%+50%*25%+70%*10%+80%*25%) = 48.5%
Fixed cost+Desired profit = 1264000+120000 = 1384000
Total restaurant sales (for desired profit) = 1384000/.485 = $2853608
Allocation of total sales :
Allocation of total sales Appitezers 428041 Main entrees 1426804 Desserts 285361 Beverage 713402 Total sales 2853608