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20 January, 11:57

During 2016, the Beach Restaurant had sales revenues and food costs of $800,000 and $600,000, respectively. During 2017, Beach plans to introduce a new menu item that is expected to increase sales revenues by $100,000 and food costs by $40,000. Assuming no changes are expected for the other food items, operating profits for 2017 are expected to increase bya.) $260,000. b.) $100,000. c.) $60,000. d.) $40,000.

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  1. 20 January, 11:59
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    It is $60,000 (C)

    Explanation:

    As at 2016:

    Operating Profits = $800,000 - $600,000

    =$200,000.

    At at 2017

    Operating Profit = (800,000+100,000) - (600,000+40,000)

    =900,000-640,000

    =$260,000

    Increase in Operating Profit = $260,000 - $200,000.

    =$60,000

    This represents increase of [ (60,000/200,000) * 100% ] 30%
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