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Accounting - Which offer is the best one and why?

Can you please tell me what is the offer of G. Jones? Should the present method of operating the confectionery be changed? G. Jones has submitted a proposal to V. Schultz to take over operation of the confectionery in the theatre and to pay Westbrooke Cinema 25 per cent of sales. At present, the salary for the booth operator is $500 per week and the cost of the merchandise sold represents approximately 50 per cent of the sales revenue. (Example: Sales 300 x 0.50 = 150 cost of merchandise sold.) Based on this information and the confectionery income for the first two months, Schultz would like an opinion on whether it would be more profitable to run the booth or to lease it to Jones. Calculate what it is costing Westbrooke to run the confectionery. Subtract the costs from the revenue it generates. Is it profitable? Compare the current set up with the option of letting Mr. G. Jones operate the confectionery. What will Westbrooke make?

Public Comments

1. look up differential accounting on google or some other search engine. i know you need to use a "differential analysis." should look something like this. differential income from alternative: revenue from operating proposed xxxxx revenue from operating current - xxxxx differential income from proposed = xxxx differential costs of alternative: costs from operating proposed xxxxx costs from operating current - xxxxx differential costs of proposed = xxxx then minus differential income from proposed from differential costs of proposed. this will equal your differential profit from accepting the proposal.