A restaurant Manager is working on the budget for next year using the bottom-up
ID: 2548498 • Letter: A
Question
A restaurant Manager is working on the budget for next year using the bottom-up approach to pricing. He has the following information: 10% ROI desired on present investment of $300,000 50% Book value of depreciable assets is $230,000, annual straightline depreciation rate is 15% $45,000 $5,500 $11,000 $12,500 $31,000 32.0% 40.0% no more than 11% of revenue Net Income Required Income Tax Rate Depreciation Rent Insurance Utilities Admin. & General Mgmt. Salaries Food Labor Cost Other Operating Costs a What is the restaurant's Operating Income Before Tax? (Use the formula below) 1- Tax Rate b. What is the total of Fixed Costs? c. What is the total of Fixed Costs plus ROl plus Income Tax paid? What percent does this sum represent? Given the above information, what revenue level should be achieved? Using the determined revenue, calculate the maximum budget amount for Food & Labor d. e. Costs Using the determined revenue, calculate the maximum budget amount for Other Operating Costs Produce a Condensed Income Statement. Determine the check average for the restaurant using the following information: f. g. h. 100 seat restaurant Annual turnover -2.0 6 Operating days/week i. Break check average down by meal period using the following information Breakfast Lunch Dinner 25% of sale 40% of sales 35% of sales open 6 days/week at 2.0 turn open 6 days/week at 2.8 turn open 5 days/week at 1.5 turn *Explanation / Answer
Net Income After Tax 30000 Tax 30000 Net Income Before Tax 60000 Depreciation 34500 Rent 45000 Insurance 5500 Utilities 11000 Admin & General 12500 Management Salary 31000 199500 Food 375529.4 Labor Cost 469411.8 Other Operating Costs 129088.2 Total Revenue 1173529 (A) Operating Income before Tax 60000 (B) Total Fixed Costs 139500 (Rent+Insurance+Utilities+Admin& General+management salary) © Fixed Cost+ ROI+ Income Tax 199500 (D) Revenue 1173529 € Max Food & labour 844941.2 (F) Max Other Operating Costs 129088.2 (G) Same as above (H) Check Average per day 677.0362 (1173529*6/(100*2*52)) (I) Check Average breakup - Breakfast 169.259 (1173529*25%*6/(100*2*52)) - Lunch 193.4389 (1173529*40%*6/(100*2.8*52)) - Dinner 148.1017 (1173529*35%*5/(100*1.5*52))