Question: Annual Information Menu Pricing Average Visits Per Year Per Customer 10 Average Spend on Sandwich $5.00 Average Spend on Drink $2.00 Variable Cost of Sandwich

Annual Information

Menu Pricing

Average Visits Per Year Per Customer

10

Average Spend on Sandwich

$5.00

Average Spend on Drink

$2.00

Variable Cost of Sandwich

$3.00

Variable Cost of Drink

$0.50

Customers

1000

Sandwich Only Customers

20%

Sandwich + Drink Customers

80%
  1. Suppose that Linda is considering a promotional sandwich + drink bundle, which would eliminate the sandwich only option (only 1 menu item remains). At a bundle price of $6.00, compute Lindas profits if there is a 20% increase from her previous annual customer base and a 20% increase in the average visits per year per customer. Assume that Lindas costs remain the same. (please show your work)

B. What are Linda's profits?

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