You are a finance student helping your cousin who owns a Deli / Sandwich Shop. H

Question

You are a finance student helping your cousin who owns a Deli / Sandwich Shop. He is struggling with the decision about what will be the impact if the minimum wage by 2019.

He has developed a set of schedules with the salary budget, HR costs, and the proforma P & L for the current year.

He asks you to develop estimated P & Ls assuming that he has to bring all employees in line with the minimum wage by 2019. At the same time he would plan a 3% per year cost of living adjustment for all of the other hourly employees.

What is the impact of complying with the minimum wage? (Do proforma p & l)

What sales level is necessary to maintain the same profit margin through 2019, with these wage adjustment?

What course of action can you recommend?

Name: The Minimum Wage issue Forecasting Objective: 1. To explain and test the forecasting process of tore hours of Dail 11:00 11:00 21:00 20:00 45 Weekly 45 12 65 closed certain closed christmas, 4th July, Mem day; New years day, thanks labor 359 open 3315 hours Staff Vacation, not paid not ax rate tion

Explanation / Answer

389696

PARTICULARS YEAR1 YEAR2 YEAR3 REVENUE 608900 DIRECT COSTS 219204 219204 219204 GROSS MARGIN

389696

TOTAL PAYROLL 295681 333600 342344 TOTAL BENEFITS 28750 28750 28750 TOTAL FICA 22160 25020 25675.80 TOTAL UE 1350 1415 1532 TOTAL HR EXPENSES 347941.60 388785 398301.80 UTILITIES 2400 2400 2400 INSURANCE 5000 5000 5000 TOTAL OPERATING EXPENSES 355341 396185 405701.80 TOTAL COST 574745.60 615389 624905.80 PROFIT BEFORE INTEREST AND TAX 34354.40 PERCENTAGE OF COST ON REVENUE 94.36% 94.36% 94.36% IF COMPANY WANTS TO MAINTAIN SAME % SALES IS 608900 652171.47 662257.10 INCREASE IN SALES 43271.47 53357.10

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