**Case Study: Investment in K&S Place**Kelly and Sam Morse have invested $500,000 in K&S Place. Their projected costs and activities are as follows:- **Variable Cost:** 63%- **Monthly Fixed Costs:** $30,000- **Monthly Covers Served:** 10,000**Questions:**1. If a monthly profit of $5000 must be earned in addition to the fixed costs, what must the average check be? 2. What would you want to compare the result you calculated with to see if it is reasonable to achieve that check?Answer the following questions and show your work.

Answered: uestions below. Show your work. $5000…

Business

Accounting

uestions below. Show your work. $5000 must be earned in addition to the fixed costs, what must the average check be?

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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Concept explainers

Bookkeeping

Bookkeeping is the process of recording the financial transactions of a company on a regular basis. With the process of bookkeeping, companies can track important financial information that helps management in making crucial decisions.

Question

**Case Study: Investment in K&S Place**

Kelly and Sam Morse have invested $500,000 in K&S Place. Their projected costs and activities are as follows:

- **Variable Cost:** 63%
- **Monthly Fixed Costs:** $30,000
- **Monthly Covers Served:** 10,000

**Questions:**

1. If a monthly profit of $5000 must be earned in addition to the fixed costs, what must the average check be?

2. What would you want to compare the result you calculated with to see if it is reasonable to achieve that check?

Answer the following questions and show your work.

Expert Solution

Step 1: Understanding

To calculate the average check , break even calculation ofcost volume analysis is applied. In break even calculation, the desired profit and fixed cost is added to be divided by the contribution margin ratio to arrived at the required sale revenue.

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