Question

The Grand Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Paul Weld, the manager of Grand, has determined 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 Contribution Total Sales Margin Ratio 15% 50% 50% 25% 10 % 50 % 25% 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 $117,000. The company has fixed costs of $1,053,000 per year. Part 1 Your answer is incorrect. Calculate 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. 0.251 and final answers to O decimal places, e.g. 2,510.) Total restaurant sales $ Sales from Each Product Appetizers Main entrees $ Desserts ी ी Beverages

Answer 1

Weighted average contribution margin ratio = (15%*50%+50%*25%+10%*50%+25%*80%) = 45%

Total restaurant sales = (117000+1053000)/.45 = 2600000

	Sales for each product
Appetizers	2600000*15% = 390000
Main entrees	2600000*50% = 1300000
Desserts	2600000*10% = 260000
Beverages	2600000*25% = 650000