Reference no: EM13918354

REQUIREMENT B (Already Answered) 1. Luca, on his way to go night fishing, asked your group to stay late and prepare an incremental analysis to determine the impact on Los Santos’ operating income during the first year should the new fusion unit be purchased. 2. Assume the price of fusion pills was $0.85 each, what would the first year impact be on operating income should the fusion unit be purchased Michael De Santa was always on what he called the seafood diet. Most thought it meant he only ate fish. What it actually meant was he saw food and he ate it “the see food diet.” This is why the Los Santos Restaurant Division reported to him. The division was composed of three individual businesses. A night club flanked on the right side by a steak house and flanked on the left side by an Italian restaurant featuring recipes from his Sicilian roots. The $300,000 of steak house fixed expenses included the compensation of employees of $120,000. These employees would be released if the steak house was closed. All of the steak house’s equipment is fully depreciated, so none of the $300,000 pertains to such items. Furthermore, disposal values of equipment will be exactly offset by the costs of removal and remodeling. If the steak house is closed, De Santa believes the Nightclub sales will increase by $250,000 and the Italian Restaurant sales by $200,000. The nightclub would not require any additional hiring but the Italian restaurant would require an additional person at an annual cost of $30,000. The modest sales predictions are partially based on the fact that the steak house has helped lure customers to the nightclub and, thus, improved overall sales. If the steak house is closed the lure impact would dissipate. Current financial data follows: Total Nightclub Italtian Steak Sales $6,000 5,000 $400 $600 Variable expenses 4.090 3,500 200 390 Contribution margin $1,910 (32%) $1,500 (30%) $200 (50%) $210 (35%) Fixed expenses Operating inc (loss) $810 $750 150 (90)