Managerial Accounting, Second Edition by James Jiambalvo
Solving Managerial Accounting Problems Using Microsoft Excel
for Windows Templates by Rex A Schildhouse
Exercise E7-6 Incremental Analysis and Opportunity Costs
Sawyer's Seafood Restaurant has been approached by Wellsworth Real Estate, which wants to hold an employee
recognition dinner next month. Katie Miller, a manager of the restaurant agreed to a charge of $75 per person, for food,
wine, and dessert, for 120 people. She estimates that the cost of unprepared food will be $20 per person and beverages
will be $10 per person.
To be able to accommodate the group, Katie will have to close the restaurant for dinner that night. Typically, she would
have served 130 people with an average bill of $45 per person. On a typical night, the cost of unprepared food is $15 per
person and beverages are $12 per person. No additional staff will need to be hired to accommodate the group from
Part a . Calculate the incremental profit or loss associated with accepting the Wellsworth group.
The incremental profit is as follows:
Less cost of unprepared food and beverage Amount
Lost revenue Amount
Cost savings for food and beverage Amount
Loss profit Formula
Part b . What was the opportunity cost of accepting the Wellsworth group?
Part c . Should Katie have considered any qualitative factors in her decision? Explain.
FileName: e37208f0-4b00-4acb-8071-4905113d016a.xls, Tab: Exercise E7-6, Page 1 of 2, 7/13/2011, 5:59 PM
Instructions for the Microsoft Excel Templates
Detail and information on Excel is contained within the manual.
Striking the "F1" key or following the path "Windows>Excel Help" will invoke the Office Assistant
and bring up one of several help menus.
Type your name into the cell "D5". This will be copied by formula to the rest of the pages as required.
Type the due date of your problem into cell "I5". This will be copied by formula to the rest of the pages as required.
Type the instructor's name into cell "D6". This will be copied by formula to the rest of the pages as required.
Type the course identifier into cell "I6". This will be copied by formula to the rest of the pages as required.
The problem is identified for you in cell "B7".
In "DATE" cells enter the date in any of several formats and Excel will format it correctly.
If more than one page is preformatted into the problem, page breaks are preset and formulas are
set to copy the header into the remaining pages.
Place the proper account title in the cell where the word "ACCOUNT" appears on the template.
Place the amount in the cell where the word "AMOUNT" appears on the template. A formula may be placed in
Enter a number like 914 to signify units or gallons where the word "NUMBER" appears.
Write a formula into cells where the word "FORMULA" appears. In these cells, an amount calculated outside of
Place the explanation for the entry in the cell where the word "EXPLANATION" appears on the template.
Insert the account number where "ACCT #" appears on the template during posting.
Insert the journal reference where "JOURN #" appears on the template during posting.
Insert the title in the cell where "TITLE" appears on the template.
The print area is defined to fit onto 8 1/2" X 11" sheets in portrait or landscape mode as required.
The gray filled cells define the perimeter of the problem and the print area.
The problem is formatted for whole dollars with comma separations (no cents) except where required.
The display may have "Freeze Pane" invoked so column titles remain visible during data entry.
Negative values may be shown as ($400) vice -$400.
Enter a string like: ($259,417 X 12 months) + (0.3651 X 5,434,631) where the word TEXT appears.