The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in southwest

Question

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. Contribution Margin Ratio 70 % 25 % 70 % 80 % Percent of Appetizers Main entrees Desserts Beverages Total Sales 15 % 50% 10% 25 % 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 $1,343,000 per year (c) Suppose that Paul reduces the selling price on entrees and increases fixed costs as proposed in part (b), but customers are not swayed by the marketing efforts and the sales mix remains what it was in part (a). Compute 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. 10.251 and final answers to 0 decimal places, e.g. 2,510.) Total restaurant sales Sales from Each Product Appetizers Main entrees Desserts Beverages

Explanation / Answer

Variable cost

Appetizers 15%* (100% - 70%) 0.045

Main entrees 50%*(100% - 25%) 0.375

Desserts 10%*(100% - 70%) 0.03

Beverages 25%*(100% - 80%) 0.05

Total variable cost 0.5 or 50%

$1343000 + $117000 + 0.5x = x

$1460000 + 0.5x = x

x = $2920000.

Appetizers $2920000 * 15% = $438000

Main entrees $2920000 * 50% = $1460000

Desserts $2920000 * 10% = $292000

Beverages $2920000 * 25% = $730000.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.