Elora Hotel's restaurant provides 3 services namely, breakfast, lunch, and dinner services. The accountant has prepared...

 

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Elora Hotel's restaurant provides 3 services namely, breakfast, lunch, and dinner services. The accountant has prepared a segmented contribution margin income statement for the past year based on the 3-meal periods, as shown below. The Hotel manager is concerned about the lunch service, as it has been showing a loss for the past few years. Breakfast $419,000 $ 241,000 Contribution margin 178,000 Less: Fixed expenses 118,000 Net operating income (loss)$ 60,000 $ Sales Less: Variable expenses Lunch Dinner 740,000 $ 426,000$ 287,000 257,000 169,000 107,000 453,000 508,000 (55,000) $ 62,000 $ Total 1,585,000 785,000 800,000 733,000 67,000 Required: a study indicates that 40% of the fixed costs of lunch services are common costs, so will continue even if the lunch service is dropped. In addition, the elimination of the lunch service will result in a 10% increase in the sales of the breakfast service and a 15% increase in dinner service. What will be the effect on Net operating income if lunch service is dropped? Net operating income by Elora Hotel's restaurant provides 3 services namely, breakfast, lunch, and dinner services. The accountant has prepared a segmented contribution margin income statement for the past year based on the 3-meal periods, as shown below. The Hotel manager is concerned about the lunch service, as it has been showing a loss for the past few years. Breakfast $419,000 $ 241,000 Contribution margin 178,000 Less: Fixed expenses 118,000 Net operating income (loss)$ 60,000 $ Sales Less: Variable expenses Lunch Dinner 740,000 $ 426,000$ 287,000 257,000 169,000 107,000 453,000 508,000 (55,000) $ 62,000 $ Total 1,585,000 785,000 800,000 733,000 67,000 Required: a study indicates that 40% of the fixed costs of lunch services are common costs, so will continue even if the lunch service is dropped. In addition, the elimination of the lunch service will result in a 10% increase in the sales of the breakfast service and a 15% increase in dinner service. What will be the effect on Net operating income if lunch service is dropped? Net operating income by

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After Elimination of Lunch Sales Breakefast Dinner Less Variable Expenses Breakfast Dinner Tot... View the full answer