Question

During 2020, the Beach Restaurant had sales revenues and food costs of $700,000 and $500,000, respectively. During 2021, Beach plans to introduce a new menu item that is expected to increase sales revenues by $90,000 and food costs by $41,000. Assuming no changes are expected for the other food items, operating profits for 2021 are expected to increase by:

Answer 1

49,000 DOLLARS

Step-by-step explanation:

Operating profit is a financial metric used to calculate the profits a company make from core businesses which excludes other side investments, taxes and interests.

The formula for calculating operating profit is;

Operating profit = operating revenue - cost of goods

increase in operating profit for the year 2021 = increase in sales revenue - increase in food costs

increase in OP (2021) = 90,000 - 41,000 = 49,000 dollars.

Answer 2

$49,000

Step-by-step explanation:

Operating profit is the difference between the sales revenue from regular business activities and the operating cost incurred in the process of generating such sales.

Given that the introduction of a new menu is expected to increase sales revenues by $90,000 and food costs by $41,000, the effect on operating profit is

= $90,000 - $41,000

= $49,000

The operating profits for 2021 are expected to increase by $49,000