Question

As a recently hired MBA intern, you are working in a consulting capacity to provide an analysis for Al Dente's Italian Restaurant. A financial income Statement is presented below: Sales $2,698,000 Cost of sales (all variable) $1,557,563 Gross Margin $1,140,438 Operating expenses: Variable $277,975 Fixed $213,675 Total operating expenses: $491,650 Administative expenses (all fixed) $564,375 Net operating income $84,413 This income statement presents the sales, expenses and pre-tax operating income for a local eating facility. At Al Dente, the average meal cost for lunches and dinners are $20 and $40 respectively. Al Dente serves both lunch and dinner 300 days per year and serves twice as many lunches as dinners. As the MBA intern you are to prepare a managerial accounting focused report to the owners of Al Dente's Italian Restaurant, to include the following:

1. Prepare a contribution margin income statement using the given financial data. Use the following format:

Sales

Variable costs

Cost of sales

Operating

Total variable costs

Contribution margin

Fixed costs

Operating

Administrative

Total fixed costs

Net operating income

Answer 1

Particulars	Lunch $	Dinner $	Sub Total in $	Total in $
Sales (Note 1)	13,49,000	13,49,000		2698000
Variable cost (Note 2)
Cost of Sales			1557563
Operating			277975
Total Variable Cost				1835538
Contribution Margin(Sales- Variable cost)				862462
Fixed cost
Operating			213675
Administrative			564375
Total Fixed Cost				778050
NET OPERATING INCOME (Note 3)				84412

Note 1 : Lets assume X unit of Lunch is sold and Y unit of Dinner sold

X= 2Y ( it serves twice as many lunches as dinner)

$20*x + $40*y = 26,98,000$ Total Sales

20(2y)+40Y = 26,98,000

80Y = 26,98,000

Y = 33725 UNITS OF DINNER ARE SERVED THROUGHT YEAR (33725*40$ = 13,49,000/-)

X = 2Y I.E. 67450 UNITS OF LUNCHES ARE SERVES THROUGHT THE YEAR (67450*20$ = 13,49,000/-)

Note 2 :

Variable cost of sales $ 1557563 + Variable operating Expense $ 277975 = 18,35,538$

Note 3

Net operating income = (Contribution margin - Fixed Cost) = 862462-778050 = 84412$