A fast food restaurant has only three items on its menu. a. Calculate the standa

Question

A fast food restaurant has only three items on its menu.

a. Calculate the standard food cost percentage for each item

b. Calculate the standard food cost percentage if 50 of each are sold

c. Compute the contribution margin

150

d. Calculate the standard food cost percentage if sales are 25, 100, 25 units

e. Compute the contribution margin

. Analysis: Which scenario would you find more advantageous and why?

A fast food restaurant has only three items on its menu.

a. Calculate the standard food cost percentage for each item

b. Calculate the standard food cost percentage if 50 of each are sold

c. Compute the contribution margin

Item Cost Price Food Cost % Quantity Total Cost Total Sales 1 $3.50 $7.50 50 2 4.25 8.99 50 3 4.75 9.99 50 Total

150

Contribution Margin ($,%) 100.0%

d. Calculate the standard food cost percentage if sales are 25, 100, 25 units

e. Compute the contribution margin

Item Cost Price Food Cost % Quantity Total Cost Total Sales 1 $3.50 $7.50 25 2 4.25 8.99 100 3 4.75 9.99 25 Total 150 Contribution Margin ($,%)

. Analysis: Which scenario would you find more advantageous and why?

Explanation / Answer

ReqA: a. Std food cost of each item Item Cost Price Food Cost% Quantity Total Cost Total Sales (Cost/Price) 1 3.5 7.5 46.67% 50 175 375 2 4.25 8.99 47.27% 50 212.5 449.5 3 4.75 9.99 47.55% 50 237.5 499.5 Total 625 1324 b. Std food cost percentage = Total cost / Total sales *100 (   625 / 1324 ) *100 = 47.21% C. Total contribution margin: CM ratio = 100- Total cost percentage                        100 - 47.21% = 52.79% Total Contribution margin = Total Sales -Total Cost =1324-625 = $ 699 Contribution margin = $ 699 ( 52.79%) ReqB. Item Cost Price Food Cost% Quantity Total Cost Total Sales (Cost/Price) 1 3.5 7.5 46.67% 25 87.5 187.5 2 4.25 8.99 47.27% 100 425 899 3 4.75 9.99 47.55% 25 118.75 249.75 Total 631.25 1336.25 d. Std food cost percentage = Total cost / Total sales *100 (631.25/1336.25 ) *100 = 47.24% C. Total contribution margin: CM ratio = 100- Total cost percentage                        100 - 47.24% = 52.76% Total Contribution margin = Total Sales -Total Cost =1336.25-631.25 = $ 705 Contribution margin = $ 705( 52.76%)

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