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

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

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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**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.
Transcribed Image Text:**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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