90.2K

Verified Solution

Link Copied!

Before franchising her Happy Noodles restaurant concept owner Fay Woo had made the following assumptions. (Click the icon to view the assumptions.) 0 (Click the icon to view more information.) - X More Info Read the requirements Requirement 1. What was the average restaurant's operating income before these changes? Woo believed people would pay $4.75 for a large bowl of noodles. Variable costs would be $1.90 a bowl creating a contribution margin of $2.85 per bowi. Fay Woo estimated monthly fixed costs for franchisees at $8,850. Franchisees wanted a minimum monthly operating income of $6,000 Identify the formula labels and compute the operating income before the changes. Break even point Times Variable expenses Print Done Contribution margin Less: Fixed expenses Operating income Requirement 2. Assuming that the price cut and advertising campaign are successful at increasing volume to the projected level, will the franchisees still earn their target profit of $5,000 per month? Show your calculations. Identify the formula labels and compute the operating income after the changes. More Info Times Contribution margin Woo did franchise her restaurant concept Because of Happy Noodles' success, Fresh Noodles has come on the scene as a competitor. To maintain its market share, Happy Noodles will have to lower its sales price to $4.25 per bowl. At the same time, Happy Noodles hopes to increase each restaurant's volume to 6.500 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 6,000 bowis per month Less: Operating income Cutting the sales price and advertising allow the franchise owners to earn their target profits of $6,000 per month Print Done

Answer & Explanation Solved by verified expert

See Answer