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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 $725,400. At the same time, he is proposing to change the sales mix to the following. Appetizers Main entrees Desserts Beverages Appetizers Percent of Total Sales Desserts Beverages Total restaurant sales $ Main entrees $ $ 25 % $ 25 % 10 % Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income $145,080. (Round intermediate calculations to 3 decimal places e.g. 10.251 and final answers to O decimal places, e.g. 2,510.) $ 40 % Contribution Margin Ratio 50 % 10 % 50 % Sales from Each Product 80 %

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 $725,400. At the same time, he is proposing to change the sales mix to the following. Appetizers Main entrees Desserts Beverages Appetizers Percent of Total Sales Desserts Beverages Total restaurant sales $ Main entrees $ $ 25 % $ 25 % 10 % Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income $145,080. (Round intermediate calculations to 3 decimal places e.g. 10.251 and final answers to O decimal places, e.g. 2,510.) $ 40 % Contribution Margin Ratio 50 % 10 % 50 % Sales from Each Product 80 %

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $725,400. At the same time, he is proposing to change the sales mix to the following. Appetizers Main entrees Desserts Beverages Appetizers Main entrees Percent of Total Sales 25 % 25 % Total restaurant sales $ Desserts Beverages Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income $145,080. (Round intermediate calculations to 3 decimal places e.g. 10.251 and final answers to 0 decimal places, e.g. 2,510.) $ 10 % $ 40 % $ $ Contribution Margin Ratio 50 % 10 % Sales from Each Product 50 % 80 %
Transcribed Image Text: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 $725,400. At the same time, he is proposing to change the sales mix to the following. Appetizers Main entrees Desserts Beverages Appetizers Main entrees Percent of Total Sales 25 % 25 % Total restaurant sales $ Desserts Beverages Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income $145,080. (Round intermediate calculations to 3 decimal places e.g. 10.251 and final answers to 0 decimal places, e.g. 2,510.) $ 10 % $ 40 % $ $ Contribution Margin Ratio 50 % 10 % Sales from Each Product 50 % 80 %
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