### What variable rate is the owner projecting

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Question -

(a) The owner of Brad 1 Restaurant estimates that fixed costs for the coming year will be RM860, 000. Based on his investment in the business, he wants a profit of RM980, 000 for the year. Experience has shown that the average check is RM20.90.

(i) If total variable cost is RM900, 000, what level of Ringgit (RM) sales will be required to earn the target restaurant profit?

(ii) Given total variable costs and total sales figures calculated in Question 1(i), what variable rate is the owner projecting?

(iii) Given the variable rate calculated in Question 2(ii), determine the contribution rate. Describe the two limitations of CVP analysis.

b) The following information is from the records of Brad 2 Restaurant:

Sales RM976, 000

Variable cost RM366, 000

Fixed cost RM300, 000

Assume that sales volume equals to 25,000 covers:

(i) Calculate profit.

(ii) Calculate average Ringgit (RM) sales.

(c) Describe the two limitations of CVP analysis.

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