Prepare an annual projection for a family restaurant given this information: Req
ID: 2600598 • Letter: P
Question
Prepare an annual projection for a family restaurant given this information: Required Return on Investment after tax should be 20% on an investment of $260,000. The tax rate is 25%.
a. In addition the restaurant has a Depreciation rate of 20% per year on Fixed Assets of $200,000. It also has a Loan of $50,000 with an 8% Interest rate. Other Known Costs are Insurance: $10,000, License: $2,500, Utilities: $12,000, Maintenance: $5,000, Administration: $48,000, and Salaries: $95,000.
b. The varable cost percentages are follows: Food cost 28%; labor cost 30% and other variable costs 12%
c. The restaurant is open 300 days, has 90 seats and has and average turnover of 2. . Compute the number of customers and the average check
Conputation of required pre-tax income Required After-Tax Net Income: Required Pre-Tax Income: Known Costs Depreciation Interest Insurance License Utilities Maintenance Administration Salaries Pre-tax income Total Known Costs Variable Cost Percentages Food Cost 28.0% Wage Cost 30.0% Other Costs 12.0% Total Variable Cost %. Revenue Necessary Number of Customers Average Check Reconstruct the Income Statement as Verification: Revenue Food Cost @ 28% Wage Cost @ 30% Other Costs @ 12% Insurance License Utilities Maintenance Administration Salaries Depreciation Interest Total Expenses Pre-Tax Income Taxes @25% Net Income After TaxExplanation / Answer
INCOME STATEMENT
REVENUE
952776
LESS VARIABLE COST 70%
666943
CONTRIBUTION 30%
285833
FIXED COSTS
216500
PROFIT BEFORE TAX
69333
TAX 25%
17333
PROFIT AFTER TAX
52000
WORKINGS
$
$
COMPUTATION OF REQUIRED PRE TAX INCOME
REQUIRED AFTER TAX NET INCOME
52000
REQUIRED PRE TAX INCOME
69333
KNOWN COSTS
DEPRECIATION ( 20% X 200k)
40000
INTEREST EXPENCE ( 8% X 50k)
4000
INSURANCE
10000
LICENCE
2500
UTILITY
12000
MAINTENANCE
5000
ADMIN
48000
SALARIES
95000
216,500
SELLING PRICE
100
VARAIBLE COST 70%
FOOD 28%
LABOUR 30%
OTHER 12%
INCOME STATEMENT
REVENUE
952776
LESS VARIABLE COST 70%
666943
CONTRIBUTION 30%
285833
FIXED COSTS
216500
PROFIT BEFORE TAX
69333
TAX 25%
17333
PROFIT AFTER TAX
52000