The Creekside Inn is a restaurant in Tucson, Arizona

ACC 560 Week 4 Assignment

P6-4A The Creekside Inn is a restaurant in Tucson, Arizona. It specializes in southwestern style meals in a moderate price range. Terry Wilson, the manager of Creekside, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows.

Percent of Total Sales Contribution Margin Ratio
Appetizers 10% 60%
Main entrees 60% 30%
Desserts 10% 50%
Beverages 20% 80%

Terry is considering a variety of options to try to improve the profitability of the restaurant. Her goal is to generate a target net income of $150,000.The company has fixed costs of $1,200,000 per year.

Instructions:
a. Calculate the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income.

b. Terry believes the restaurant could greatly improve its profitability by reducing the complexity and selling price of its entrees to increase the number of clients that it serves. It would then more heavily market its appetizers and beverages. She is proposing to drop the contribution margin ratio on the main entrees to 10% by dropping the average selling price. She envisions an expansion of the restaurant that would increase fixed costs by 50%. At the same time, she is proposing to change the sales mix to the following.

Percent of Total Sales Contribution Margin Ratio
Appetizers 20% 60%
Main entrees 30% 10%
Desserts 10% 50%
Beverages 40% 80%

Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income.

c. Suppose that Terry drops the selling price on entrees and increases fixed costs as proposed in the second part of the question, but customers are not swayed by the marketing efforts and the sales mix remains what it was in the first part of the question. Compute the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income.

Click here for the solution: The Creekside Inn is a restaurant in Tucson, Arizona

Tucson, a U.S. corporation organized in Year 1, reports the following items for a three-year period

C:16-41 Foreign Tax Credit Limitation. Tucson, a U.S. corporation organized in Year 1, reports the following items for a three-year period.

Foreign tax accrual $ 100,000 $ 120,000 $ 180,000
Foreign source taxable income 400,000 300,000 500,000
Worldwide taxable income 1,000,000 1,000,000 1,000,000
The foreign source and worldwide taxable income items are determined under U.S. law.

a. What is Tucson’s foreign tax credit limitation for each of the three years (assume a 34% U.S. corporate tax rate and that income from all foreign activities fall into a single basket)?
b. How are Tucson’s excess foreign tax credits (if any) treated? Do any carryovers remain after Year 3?
c. How would your answers to Parts a and b change if the IRS determines that $100,000 of expenses allocable to U.S.-source income should have been allocable to foreign source income?
d. What measures should Tucson consider if it expects its current excess foreign tax credit position to persist in the long-run?


Click here for the solution: Tucson, a U.S. corporation organized in Year 1, reports the following items for a three-year period