Before franchising her Global Wok restaurant concept, owner Sung Chi had made the following assumptions

View the assumptions.

View more information.

Assumptions

Read the requirements.

Requirement $1.$ What was the average restaurant's operating income before these changes?

Identify the formula labels and compute the operating income before the changes.

Chi believed people would pay $$5\mathrm{.}25$ for a large bowl of noodles. Variable co would be $$2\mathrm{.}10$ a bowl creating a contribution margin of $$3\mathrm{.}15$ per bowl. Sun estimated monthly fixed costs for franchisees at $$7,500.$ Franchisees wanted minimum monthly operating income of $$7,050.$

Requirements

What was the average restaurant's operating income before these changes?

Assuming that the price cut and advertising campaign are successful at increasing volume to the projected level, will the franchisees still earn their tars profit of $$7,050$ per month? Show your calculations.

More information

Chi did franchise her restaurant concept. Because of Global Wok's success, Value Noodles has come on the scene as a competitor. To maintain its market share, Global Wok will have to lower its sales price to $$4\mathrm{.}75$ per bowl. At the same time, Global Wok hopes to increase each restaurant's volume to $5,500$ bowls per month by embarking on a marketing campaign. Each franchise will have to contribute $$500$ per month to cover the advertising costs. Prior to these changes, most locations were selling $5,000$ bowls per month.