You have the following projections about the costs in a family restaurant for ne
ID: 2454903 • Letter: Y
Question
You have the following projections about the costs in a family restaurant for next year: Net income required: 15% after income tax on the owner’s present investment of $80,000, income tax rate is 28%. Depreciation: Present book value (consolidated) of furniture and equipment is $76,000, depreciation rate is 20%. Interest: Interest on a loan outstanding of $35,000 is 8%. Known Costs Variable Costs Insurance $ 3,000 Food cost, 36% of sales revenue License 2,500 Wage cost, 38% of sales revenue Utilities 8,400 Other costs, 12% of sales revenue Maintenance 3,600 Administration 9,800 Salaries 41,600 a. What sales revenue would the restaurant 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 365 days, had 60 seats, and had an average seat turnover of 2.5 times per day?
Explanation / Answer
Calculation of sales revenue required to meet the desired level
Sales revenue required(after Tax)
80000*15%
12000
Depreciation
76000*20%
15200
Interest
35000*8%
2800
Insurance cost
3000
License
2500
Utilities
8400
Maintenance
3600
Administration
9800
Salaries
41600
Food Cost
36%of sales
4320
Wage
38% of sales
4560
Other cost
12% of sales
1440
109220
If restaurent is open for 365 days a year than it should be ensured that $299.24(109220/365) of sales is to be met daily.or we can say for every occupied seat there has to be an $2 purchase.
Calculation of sales revenue required to meet the desired level
Sales revenue required(after Tax)
80000*15%
12000
Depreciation
76000*20%
15200
Interest
35000*8%
2800
Insurance cost
3000
License
2500
Utilities
8400
Maintenance
3600
Administration
9800
Salaries
41600
Food Cost
36%of sales
4320
Wage
38% of sales
4560
Other cost
12% of sales
1440
Sales req.109220
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