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.

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(Dividing the Bill) Assume that you and your friends go to a restaurant as a group

Group Exercise 8-35 (Dividing the Bill) Assume that you and your friends go to a restaurant as a group. At the end of the meal, you must decide how the bill for the group should be shared. One alternative is to figure out the cost of what each individual consumed and divide up the bill accordingly. Another is to split the bill equally among the individuals.

Required:
1. Which system for dividing the bill is more equitable? Which system is easier to use? How does this issue relate to activity based costing?
2. Should ABC always identify the costs? Explain when and when not.

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In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn

In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn, which was owned by his parents. Schumacher claims that his parents induced him to leave his previous job and to make the move by orally agreeing to provide him a job managing the inn for life and to leave the business and a large parcel of land to him when his first parent died. Schumacher was given free reign in managing the inn and was allowed to retain all profits of the business but was not given any salary or wage. While he was operating the inn, Schumacher used his own funds to build a home for his family on his parents’ land, install a well, buy equipment for the business, and develop various marketing tools for the business. In the fall of 1998, Schumacher suspected that his parents were about to sell the inn and the adjoining property. He brought suit for a restraining order to prevent them from doing so, claiming breach of contract and unjust enrichment, among other claims. In October 1998, the parents notified Schumacher that his employment at the inn and his right to possess the adjoining property were terminated. The parents moved for summary judgment. The trial court held that Schumacher’s oral contract claim was invalid because the contract needed to be in writing under applicable Minnesota law. However, does Schumacher have a valid claim for unjust enrichment?

Click here for the solution: In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn