With reference to the information provided for Cindy’s Restaurant in Problem 2.5 (round all percentage calculations to a whole percentage):
a. Calculate the contributory income percentage for each of the three divisions.
b. Using the information in Problem 2.5, calculate the cost of sales, wages and salaries costs, and other direct costs as a percentage of sales revenue for each of the divisions.
c. If there were a shift of $8,000 in sales revenue from the banquet area to the dining room, would you expect the restaurant’s overall operating income to increase or decrease? Explain your reasoning to support your answer.
d. Assuming that the shift of $8,000 of sales revenue does occur, total sales revenue will not change. Total indirect, undistributed costs will not change. Cost of sales, wages and salaries costs, and other direct costs must be recalculated for each division to find the new departmental total operating income.
e. After allocating the indirect costs, would you now consider closing any of the divisions? Why or why not?
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