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Fixed costs and variable costs; consider the following:

Amy’s Restaurant Adam’s Restaurant

Revenue

$2,500,000

■■■■■■

$2,500,000

■■■■■■

Variable Costs

$1,000,000

40%

$750,000

30%

Fixed Costs

$1,250,000

50%

$1,500,000

60%

Total Costs

$2,250,000

■■■■■■

$2,250,000

■■■■■■

Profit

$250,000

10%

$250,000

10%

What if you decided that you could increase sales by 10% for both restaurants? Evaluate the differences in profit for each restaurant. (fill in the chart below and comment on your observations)

New Chart: Amy’s Restaurant Adam’s Restaurant

Revenue

$___[26]_____

■■■■■■

$__[27]___

■■■■■■

Variable Costs

$__[28]____

40%

$____[29]_____

30%

Fixed Costs

$1,250,000

_ [30]__%

$1,500,000

_ [31]_%

Total Costs

$_[32]_

■■■■■■

$___ [33]_____

■■■■■■

Profit

$_[34]____

_ [35]__%

$___ [36]___

_ [37]_%