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

3. Using the CM income statement format, verify that your calculated break-even volume for lunches and dinners results in a NOI of zero (hint: in your prepared CM statement from #1, breakout the Sales dollars into subcategories lunch and dinner as shown below, using the values of X for in the # of meals cells). Present the entire CM statement at the BE level.

Answer 1

Calculation Of Break Even Point In Dollar
	Contribution Margin = Gross Margin - Variable Operating Expesnes
			= 1140438-277975
			=862463
	Contribution Margin In % = 862463/2698000*100
			=31.97%
	Break Even Point In Dollar = All Fixed Cost / Contribution Margin %
			= (213675+564375)/31.97%
			=2433935
	Calculation Of Break Even Value
	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 + $40*y = 2433935 Total Sales
	20(2y)+40Y = 2433935
	80Y = 2433935
	Y = 30424 UNITS OF DINNER ARE SERVED THROUGHT YEAR (17565*40$ = 1216967.5/-
	X = 2Y I.E. 60848 UNITS OF LUNCHES ARE SERVES THROUGHT THE YEAR (35130*20$ = 1216967.5/-)
contributon Margin Statement
	6 answers
	Particulars	Lunch $	Dinner $	Sub Total in $	Total in $
	Sales (Note 1)	12,16,967	12,16,967		24,33,934
	Variable cost (Note 2)
	Cost of Sales			1405116.95
	Operating			250768.274
	Total Variable Cost			1655885.23
	Contribution Margin(Sales- Variable cost)				7,78,049
	Fixed cost
	Operating			213675
	Administrative			564375
	Total Fixed Cost				778050
	NET OPERATING INCOME (Note 3)				0