If there were a shift of $8,000 in sales revenue from the banquet area to the...

 

 

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If there were a shift of $8,000 in sales revenue from the banquet area to the dining room, would you expect the restaurant's overall operating income to increase or decrease? Explain your reasoning to support your answer. Assuming that the shift of $8,000 of sales revenue does occur, total sales revenue will not change. Total indirect, undistributed costs will not change. Cost of sales, wages and salaries costs, and other direct costs must be recalculated for each division to find the new departmental to- tal operating income. After allocating the indirect costs, would you now consider closing any of the divisions? Why or why not? If there were a shift of $8,000 in sales revenue from the banquet area to the dining room, would you expect the restaurant's overall operating income to increase or decrease? Explain your reasoning to support your answer. Assuming that the shift of $8,000 of sales revenue does occur, total sales revenue will not change. Total indirect, undistributed costs will not change. Cost of sales, wages and salaries costs, and other direct costs must be recalculated for each division to find the new departmental to- tal operating income. After allocating the indirect costs, would you now consider closing any of the divisions? Why or why not?

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If there is a shift of 8000 in sales revenue from the banquet area to the dining room the restaurants overall operating income would likely decrease Heres why 1 Decrease in HighMargin Revenue Banquet sales often have higher margins compared to regular dining room sales because they involve bulk orders and higherpriced menu items Shifting revenue from banquet sales to dining room sales may result in a decrease in overall profitability due to the lower margin associated with dining room sales 2 Fixed Costs Many of the restaurants costs are fixed or semivariable meaning they do not change proportionally with changes in revenue These costs include rent utilities and management salaries Therefore even if revenue decreases these fixed costs remain the same leading to a decrease in overall operating income 3 Potential Impact on Operating Efficiency Banquet sales typically require additional planning and preparation compared to regular dining room sales Therefore the restaurant ... View the full answer