1.This income statement presents the sales, expenses, and pre-tax operating income for a local eating facility. At...

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1.This income statement presents the sales, expenses, and pre-tax operating income for a local eating facility. At Al Dente, the average meal cost for lunches and dinners are $20 and $40 respectively. Al Dente serves both lunch and dinner 300 days per year and serves twice as many lunches as dinners. As the MBA intern, you are to prepare a managerial accounting focused report to the owners of Al Dente's Italian Restaurant, to include the following

Sales $4,640,560

Cost of sales (all variable) $2,679,008

Gross Margin $1,961,553 Operating expenses:

Variable $478,117

Fixed $367,521

Total operating expenses: $845,638

Administrative expenses (all fixed) $970,725

Net operating income $145,190

2. In order to increase NOI, the owner of the restaurant is considering adjustments to the quality of food ingredients currently used. Rather than using premium ingredients, the use of average quality ingredients would reduce the cost of food by 15%. The owner proposes to not change the current meal pricing. As the consultant, prepare a memo to the owner that presents the pros and cons of this change in operations. What are the potential impacts on revenue, costs, and net operating income that may result from this change? The owner does not want to see a decrease in net operating income. Could the owner make this change and absorb a decrease in customers, and how would you demonstrate numerically to support your analysis? What other factors or consequences of this decision should the owner consider besides the financial impact of the change? Hint: this qualitative analysis is to be thorough.