Question 11 You have the following projections about the costs in a family resta

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Question 11 You have the following projections about the costs in a family restaurant for next year: Net income required: 25% after income tax on the owner's present investment of $1,100,000 income tax rate is 25%. Depreciation: Present book value (consolidated) of fumiture and equipment is $500,000, depreciation rate is 15%. Interest on a loan outstanding of S350,000 is l 196. Variable Costs Food Wage cost Other costs Known Costs 45% | of sales revenue 40% | of sales revenue 5% | of sales revenue License Utilities Maintenance Administration$45,800 S30,000 S25 $80,400 S31,600 a. Using the bottom-up approach, compute the sales revenue the restaurant would have to achieve next year in order to acquire the desired net income after tax? b. What is the required average check needed to achieve the annual revenue objective if the restaurant is open 320 days, had 40 seats, and had an average seat turnover of 2.5 times per day? H. T. Members is switching to the markup approach for pricing entrées at her cafe. In the past, she has set prices based on intuition. The desired food cost percentage is 30%. Three entrées and their related costs are as follows: Chicken Delite Pork Sizzla Steak Supreme $90 S120 S150 Calculate the price for each entrées based on the Food cost % markup approach

Explanation / Answer

11)

Variable Costs are 90% of Sales revenue (45%+40%+5%), which means Gross Margin is 10% of Sales Revenue

12. Price for each entrees based on food cost % markup approach:

Desired food cost % - 30%

If Selling price =100, Food cost = 30

To calculate selling price = Food Cost *100/30

Profit after Tax        275,000.00 =1,100,000*25% Income tax 25%          91,666.67 =275000*25/75 Profit before tax        366,666.67 Add: Known Costs Insurance          30,000.00 License          25,500.00 Utilties          80,400.00 Maintenance          31,600.00 Administration          45,800.00 Interest 38500 =350000*11% Total Known Costs        251,800.00 Gross Margin        618,466.67 Known costs + Profit before taxes

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