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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Business

Lina

20 October, 15:06

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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Isabel Fisher · Answer 1

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%