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% 70% Main entrees 25 % 10 % Desserts 10 % Beverages 40 % 80 % 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 Appetizers Main entrees Desserts Beverages $ Sales from Each Product

Principles of Accounting Volume 2
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Author:OpenStax
Publisher:OpenStax
Chapter3: Cost-volume-profit Analysis
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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 $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%
70%
Main entrees
25 %
10 %
Desserts
10 %
Beverages
40 %
80 %
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
Appetizers
Main entrees
Desserts
Beverages
$
Sales from Each Product
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 $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% 70% Main entrees 25 % 10 % Desserts 10 % Beverages 40 % 80 % 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 Appetizers Main entrees Desserts Beverages $ Sales from Each Product
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