manager of Grand, has determined The Grand Inn is a restaurant in Flagstaff, Ari

Question

manager of Grand, has determined The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Paul Weld, the that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows Appetizers Main entrees Desserts Beverages Percent of Total Sales 15 % 50 % 10% 25% Contribution Margin Ratio 80% 25% 60% 80% Paul is considering a variety of options to try to improve the profitability of the restaurant. His goal is to generate a target net income of $114,000. The company has fixed costs of $1,329,000 per year o achieve the desired target net income. (Round intermediate Calculate the total restaurant sales and the sales of each product line that would be necessary t 3 decimal places e.g. 0.251 and final answers to O decimal places, eg. 2,510.) Total restaurant sales Sales from Each Product Main entrees Desserts Beverages

Explanation / Answer

Q1. Weighted Average CM ratio Percent of CM ratio Weighted Average Total Sales CM ratio Appetizers 15% 80% 12% Main entrees 50% 25% 13% Desserts 10% 60% 6% Beverages 25% 80% 20% 50.50% Fixed cost 1,329,000 Desired profits 114,000 Desired contribution 1,443,000 Target Sales: Desired contribution/ Weighted Average CM ratio 1443,000 /50.50% = 2857,426 Appetizers (2857426*15%) 428,614 Main entrees (2857126*50%) 1428713 Desserts (2857426*10%) 285742.6 Beverages (2857426*25%) 714356.5 Req b: Weighted Average CM ratio Percent of CM ratio Weighted Average Total Sales CM ratio Appetizers 25% 80% 20% Main entrees 25% 25% 6.25% Desserts 10% 60% 6% Beverages 40% 80% 32% 64.25% Fixed cost 1,914,000 Desired profits 114,000 Desired contribution 2,028,000 Target Sales: Desired contribution/ Weighted Average CM ratio 2028000/64.25% = $ 3156,420 Appetizers (3156420*25%) 789,105 Main entrees (3156420*25%) 789105 Desserts (3156420*10%) 315642 Beverages (3156420*40%) 1262568 Req C: Weighted Average CM ratio: 50.50% Desired contribution: 2028,000 Target Sales: Desired contribution/ Weighted Average CM ratio 2028000/50.50% = $ 4015,842 Appetizers (4015,842*15%) 602,376 Main entrees (4015842*50%) 2007921 Desserts (4015842*10%) 401584 Beverages (4015842*25%) 1003961

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