Question

Cost Estimation:

Anna Marinez, manager of the Dos Coyotes restaurant, wants to see whether her new advertising campaign is working to increase sales. She obtained the following data for the last nine months.

Month	Revenues	Advertising
apr	$200,000	$52,000
may	$270,000	$65,000
jun	$320,000	$80,000
jul	$480,000	$90,000
aug	$430,000	$100,000
sep	$450,000	$110,000
oct	$540,000	$120,000
nov	$670,000	$180,000
dec	$751,000	$197,000
total	$4,111,000	$994,000

1-What is the incremental revenue per dollar of advertising?

2-What is revenue in the absence of advertising?

3-What are expected revenues with $180,000 of advertising?

4- You have been asked to comment on the results. You observe that the effect of advertising on revenue is an insufficient analysis. After all, increased revenues bring increased costs for food, beverages, and waitstaff salaries. You find the following information about the restaurant's profitability without advertising.

		per customer
revenue		$35.00
food & beverage		$15.00
waitstaff salaries*		$7.00
occupancy costs		$4.00
mgmt salaries		$3.00
gross profit		$6.00

5-What is the minimum revenue required for a dollar of advertising?

Answer 1