March 29, 2017

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i don't really understand what kind of calculations they are asking for

Charlie is thinking of spending $3,000 more in year 2004 on advertising (part
of marketing expense). Because of his marketing courses, he believes he can design appealing advertisements to be placed in local newspapers and aimed at
the business luncheon trade. He estimates that if the ads are placed, they will
bring in 15 more people at lunch each day.
The average check for the additional lunch guests would be the same as that
calculated in Case 6. Use a 52-week year and the days open from Case 6. Assume that the food and beverage total cost of sales percentage will be the same
as in year 2004. (This percentage was calculated in Case 3.)
To serve the extra guests, a new employee will have to be hired at lunch for
four hours. Hourly rate of pay including fringe benefits (a free meal while on
duty, vacation pay, and so on) will be $5.42 an hour. The following variable
4259_Jagels_07.qxd 4/14/03 10:54 AM Page 323expenses will remain at the same percentage to sales revenue as they were in
year 2004 (see Case 3):
China and tableware
Other operating expenses
All other expenses are assumed to be fixed and are unaffected by the increased volume of business. Prepare calculations to show whether the $3,000
should be spent. Refer to the income statement for the 4C Company’s restaurant for year 2004.

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