PART A : CVP ANALYSISGoelwanted to set up one more branch, despite the fact that sales at the Bur Dubai kiosk and the Dubai International city branch were not as strong as those at the Karama branch. Goel was worried about the net revenue and felt that he should take a more structured approach to expansion. He was wondering if he should concentrate on the current business or open an additional restaurant? What if things will not turn out as he is expecting? His competitors were engaged in aggressive marketing and Goel knew he had to make a quick decision. The Dubai market was expanding, but the volatile nature of growth and the sheer number of competitors might eat into his profits. With these fears in mind, he knew that the present decision was going to be critical to the continued success of his business.

Task 1

Would expansion be beneficial to Goel? Respond to Goels dilemma by supporting your argument with Cost-volume profit analysis.

YALLA MOMOS INCOME STATEMENT FOR THE YEAR ENDING 2015 (IN AED) Amount in AED 504,000 151,200 352,800 Particulars Net Revenue Cost of Food sales Gross Profit Operating Expenses Rent Salaries Administrative costs Depreciation Utilities Miscellaneous expenses Advertisement costs Operating Profit Interest Net Profit 68,000 54,000 23,000 30,200 13,000 15,800 0 148,800 13,000 135,800 Note: AED - United Arab Emirates (Emirati) Dirham; US$1 = AED3.67 on April 30, 2016. Source: Created by the authors based on company data. YALLA MOMOS PROJECTIONS WITH AND WITHOUT EXPANSION (2016) (IN AED) Amounts shown in AED Sales price per unit Sales volume per period (units) Raw material cost Rent Salaries Administrative costs Depreciation Utilities Miscellaneous expenses Advertisement cost Without Expansion 20.00 27,720 6.00 75,000.00 61,400.00 26,000.00 34,720.00 14,000.00 17,060.00 8,000.00 With Expansion 20.00 36,360.00 6.00 88,000.00 75,000.00 34,000.00 38,360.00 19,000.00 19,180.00 12,000.00 16,000 Interest 13,000