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 Total SalesContribution Margin Ratio Appetizers25%50% Main entrees25%10% Desserts10%50% Beverages40%80% Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income of $117,00
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 Total Sales
Contribution Margin Ratio
Appetizers
25%
50%
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 of $117,00
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