Problem #1 Cost Estimation Anna Martinez, manager of the Casa Real restaurant, w
ID: 2597317 • Letter: P
Question
Problem #1 Cost Estimation Anna Martinez, manager of the Casa Real restaurant, wants to see whether her new advertising campaign is working to increase sales. She obtained the following data for the last 10 months month advertising $2,100 $2,900 $1,600 $3,300 $1,100 $1,850 $1,350 $4,200 $2,400 $2,850 $2,365 revenues S35,200 $39,850 S35,700 $41,300 S33.100 S37,550 $33,900 S38,800 S35,050 $40.150 $37,060 feb mar apr may jun jul aug sep oct average (1) What is the incremental revenue per dollar of advertising? (2 points) (2) What is revenue without any advertising? (2 points) (2) The contributuon margin for the restaurant is 28.5% What is the minimum revenue per dollar of advertising required to make the advertising profitable? (2 points) (3) What is expected revenue with $2,850 of advertising? (2 points)Explanation / Answer
Month Advertising Revenue Jan 2,100 35,200 Feb 2,900 39,850 Mar 1,600 35,700 Apr 3,300 41,300 May 1,100 33,100 Jun 1,850 37,550 Jul 1,350 33,900 Aug 4,200 38,800 Sep 2,400 35,050 Oct 2,850 40,150 Average 2,365 37,060 1 Incremental Revenue per $ (1) Let take minimum & maximum activity approch Max Advertising Aug 4,200 38,800 Min Advertising May 1,100 33,100 Incremental Advertising 3,100 5,700 Incremental Revenue per $ advt 1.84 (2) Revenue w/o any advertising 33100-1100*1.84 31,076 (3) Contribution margin 28.5% Minimum Revenue $ 1.84/28.5% 6.46 (4) Expected revenue $2,850 1.84x+31076 1.84*2850+31076 36,320
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