Question

Don & Moe's Pizza operates a small chain of restaurants in the Southwest. Its owners, Don and Moe, have been struggling for ways to make more money during the slowest parts of the week. Research has shown that Tuesday, Wednesday, and Thursday nights are the slowest -- pizza sales can be as much as 40% lower on thoseevenings as compared to busy nights like Friday and Saturday (and Sundays, where people like to get pizzas for the game(s)).

Moe, who took ACT 202 with Professor Carstensen, figured that they could run a special on those evenings. The "Moe Betta Special" would give customers a large pizza for $9.99, as long as the customer picked up the pizza themselves. Don, who went to Palomar, thinks the idea is crazy: a large normally sells for $17.99.

Monthly Cost Data is Provided for You: Per Unit 30,000

Direct Materials 4.25 127,500

Direct Labor 3.11 93,300

Overhead* 2.63 78,900

_______ _____________

Cost of Goods Sold 9.99 299,700

*.65 per unit is considerd variable overhead; the rest is fixed

Monthly Income for Large Pizzas Only :Per Unit   30,000

Sales 17.99 539,700

Cost of Goods Sold 9.99 299,700

________ ___________

Gross Margin 8.00 240,000

SG&A Expenses*    *173,700O

___________

Operating Income 66,300

** 1.29 per unit is considered variable SG&A; the rest if fixed

Part 1:If Dom & Moe's undertakes the "Moe Betta Special" what will be the inremental Operating Income? (9 points)You will need consider Variable Costing and need to show your work on the next page

.Part 2:What are some other considerations Moe should consider along with this special? (6 points)Please list at least three considerations on the next page.

Answer 1