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5 April, 12:06

During 2020, the Beach Restaurant had sales revenues and food costs of $790,000 and $545,000, respectively. During 2021, Beach plans to introduce a new menu item that is expected to increase sales revenues by $135,000 and food costs by $59,000. Assuming no changes are expected for the other food items, operating profits for 2021 are expected to increase by:

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  1. 5 April, 12:07
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    Answer: Operating profits for 2021 are expected to increase by $76000.

    Explanation:

    Given that,

    Sales revenues of beach restaurant = $790000

    food costs = $545000

    During 2021, restaurant plans to introduce new menu item as follows:

    Expected increase in sales revenue by $135,000 and in food costs by $59,000.

    So, Operating profits for 2021 = Expected increase in sales revenue - Expected increase in food costs

    = $135000 - $59000

    = $76000

    ∴ Operating profits for 2021 are expected to increase by $76000.
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