Question

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3. Tutti owns a fine-dining restaurant in a suburb of a major coastal city. Last year, her sales were not as high as she would have liked. To help increase her sales volume, Tutti decided to hire a sales consultant, Tina Boniner, to help bring in more customers. Tutti hired Tina on a trial basis for the first six months of the year. Tina was paid a fixed fee of $1,000 per month and a commission of 1 percent of all sales. At the end of June, Tutti wants to evaluate whether she should hire Tina for the next six months. Use the worksheet below to calculate Tutti's sales consultant cost percentage and answer the questions that follows. Mixed Expense-Sales Consultant For period: 1/1 to 6/30 Total Cost % Expense Month Sales 1% Variable Expense Fixed Fee January February $81,000 80,000 88,000 March April 92,000 May 110,000 108,000 June 6-Month Total/Average (1) Tutti has decided that she cannot spend more than 2.2% of total sales for Tina's services. Based on the six- month average cost percentage, can Tutti afford to hire Tina for another six months? (4 points) (2) Last year's average monthly sales for the first six months was $80,000. Based on this year's sales data, has Tina done a good job at increasing sales? Should she be hired again? (3 points)

Answer 1

(1)

Month	Sales	Fixed Fee	Variable Fee	Total Expense	Cost %
January	$            81,000	$               1,000	$                  810	$               1,810	2.23%
February	$            80,000	$               1,000	$                  800	$               1,800	2.25%
March	$            88,000	$               1,000	$                  880	$               1,880	2.14%
April	$            92,000	$               1,000	$                  920	$               1,920	2.09%
May	$          110,000	$               1,000	$               1,100	$               2,100	1.91%
June	$          108,000	$               1,000	$               1,080	$               2,080	1.93%
6-Month Average	$            93,167	$              1,000	$                  932	$              1,932	2.09%

6 month average for cost % can also be 2.07%

(1)
Since 6 month average for Cost % of total sales is 2.07% which is below acceptable limit of 2.2%, Tutti can afford to hire Tina for another six months.

(2)
The 6 month average sales for year is $93,167 which is quite better than previous year average monthly sales of $80000. This shows that Tina has done a good job at increasing sales and should be hired again.

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