In: Accounting
Question: The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals i...
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 |
Contribution |
|||||
Appetizers | 15 | % | 60 | % | ||
Main entrees | 50 | % | 25 | % | ||
Desserts | 10 | % | 50 | % | ||
Beverages | 25 | % | 80 | % |
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 $ 110,000. The company has fixed costs of $ 1,000,000
per year.
New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.
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 |
||
Appetizers |
$ |
|
Main entrees |
$ |
|
Desserts |
$ |
|
Beverages |
$ |
eTextbook and Media
New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.
Paul believes the restaurant could greatly improve its profitability by reducing the complexity and selling price of its entrees to increase the number of clients that it serves. It would then more heavily market its appetizers and beverages. He is proposing to reduce the contribution margin ratio on the main entrees to 10% by dropping the average selling price. He envisions an expansion of the restaurant that would increase fixed costs by $585,000. At the same time, he is proposing to change the sales mix to the following.
Percent of |
Contribution |
|||||
Appetizers | 25 | % | 60 | % | ||
Main entrees | 25 | % | 10 | % | ||
Desserts | 10 | % | 50 | % | ||
Beverages | 40 | % | 80 | % |
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 |
$ |
eTextbook and Media
New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.
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 |
$ PLEASE ANSWER SECOND TABLE |
Working
% of sale |
CM Ratio |
Weighted Average CM ratio |
|
Appetizers |
15.00% |
60.00% |
9.00% |
Main entrees |
50.00% |
25.00% |
12.50% |
Desserts |
10.00% |
50.00% |
5.00% |
Beverages |
25.00% |
80.00% |
20.00% |
Total Weighted Average CM Ratio |
46.50% |
Answers
A |
Fixed Cost |
$ 1,000,000.00 |
B |
Target Net Income |
$ 110,000.00 |
C = A+B |
Total Contribution margin required for earning target Net Income |
$ 1,110,000.00 |
D |
Total Weighted Average CM Ratio |
46.50% |
E = C/D |
Total Restaurant Sales |
$ 2,387,097 |
Working |
Sales from Each product |
|
A = Total Sales x 15% |
Appetizers |
$ 358,065 |
B = Total Sales x 50% |
Main entrees |
$ 1,193,548 |
C = Total Sales x 10% |
Desserts |
$ 238,710 |
D = Total Sales x 25% |
Beverages |
$ 596,774 |
Working
% of sale |
CM Ratio |
Weighted Average CM ratio |
|
Appetizers |
25.00% |
60.00% |
15.00% |
Main entrees |
25.00% |
10.00% |
2.50% |
Desserts |
10.00% |
50.00% |
5.00% |
Beverages |
40.00% |
80.00% |
32.00% |
Total Weighted Average CM Ratio |
54.50% |
Answer
A |
Fixed Cost |
$ 1,585,000.00 |
B |
Target Net Income |
$ 110,000.00 |
C = A+B |
Total Contribution margin required for earning target Net Income |
$ 1,695,000.00 |
D |
Total Weighted Average CM Ratio |
54.50% |
E = C/D |
Total Restaurant Sales |
$ 3,110,092 |
Working |
Sales from Each product |
|
A = Total Sales x 25% |
Appetizers |
$ 777,523 |
B = Total Sales x 25% |
Main entrees |
$ 777,523 |
C = Total Sales x 10% |
Desserts |
$ 311,009 |
D = Total Sales x 40% |
Beverages |
$ 1,244,037 |
Working
% of sale |
CM Ratio |
Weighted Average CM ratio |
|
Appetizers |
15.00% |
60.00% |
9.00% |
Main entrees |
50.00% |
10.00% |
5.00% |
Desserts |
10.00% |
50.00% |
5.00% |
Beverages |
25.00% |
80.00% |
20.00% |
Total Weighted Average CM Ratio |
39.00% |
Answers
A |
Fixed Cost |
$ 1,585,000.00 |
B |
Target Net Income |
$ 110,000.00 |
C = A+B |
Total Contribution margin required for earning target Net Income |
$ 1,695,000.00 |
D |
Total Weighted Average CM Ratio |
39.00% |
E = C/D |
Total Restaurant Sales |
$ 4,346,154 |
Working |
Sales from Each product |
|
A = Total Sales x 15% |
Appetizers |
$ 651,923 |
B = Total Sales x 50% |
Main entrees |
$ 2,173,077 |
C = Total Sales x 10% |
Desserts |
$ 434,615 |
D = Total Sales x 25% |
Beverages |
$ 1,086,538 |