. Decrease beverage costs to 20% Decrease payroll costs to 32% (but benefit costs will increase by 6% over the initi budget because of new payroll taxes not included in the original budget) Decrease operating expenses to 12% of total revenue (Fixed costs will remain at the same dollar amount as in the original budget.) What is the revised estimate of budgeted profit before tax?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Do problem 1, a through c
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Cost/Volume/Profit Analysis
Cost value profit analysis
Equations for cost volume profit analysis
Limitations of cost volume profit analysis
Cost volume profit analysis templates
.
Problems
Problem 1
a. What is the initial budgeted profit (before tax) being planned by the Spartan Land
Restaurant for the current year, given the following information?
$975,000
$135,000
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Cloud-bas
Electronic templates for business
Excel-based business budgeting
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Revenue (food)
Revenue (beverage)
Food cost = 31% of food revenue
Beverage cost = 22% of beverage revenue
Labor cost (payroll) = 34% of total revenue
Employee benefits = 18% of labor cost (payroll)
Other operating expenses = 14% of total revenue
All fixed costs = 8% of total revenue
-. The owner does not approve of the initial budget. Working together, the owner and
manager believe they can accomplish the following:
Implement marketing plans to increase the number of guests consuming food by
an additional 12,000 (guest check average =
$22.50)
Increase beverage revenues by 8% over initial estimates
Decrease food costs to 30%
Transcribed Image Text:● ● ● Cost/Volume/Profit Analysis Cost value profit analysis Equations for cost volume profit analysis Limitations of cost volume profit analysis Cost volume profit analysis templates . Problems Problem 1 a. What is the initial budgeted profit (before tax) being planned by the Spartan Land Restaurant for the current year, given the following information? $975,000 $135,000 ● ● ● ● Cloud-bas Electronic templates for business Excel-based business budgeting ● ● ● Revenue (food) Revenue (beverage) Food cost = 31% of food revenue Beverage cost = 22% of beverage revenue Labor cost (payroll) = 34% of total revenue Employee benefits = 18% of labor cost (payroll) Other operating expenses = 14% of total revenue All fixed costs = 8% of total revenue -. The owner does not approve of the initial budget. Working together, the owner and manager believe they can accomplish the following: Implement marketing plans to increase the number of guests consuming food by an additional 12,000 (guest check average = $22.50) Increase beverage revenues by 8% over initial estimates Decrease food costs to 30%
.
.
Item
.
Decrease beverage costs to 20%
Decrease payroll costs to 32% (but benefit costs will increase by 6% over the initial
budget because of new payroll taxes not included in the original budget)
Decrease operating expenses to 12% of total revenue
(Fixed costs will remain at the same dollar amount as in the original budget.)
c. What is the revised estimate of budgeted profit before tax?
Problem 2
The manager of the Spartan Land Restaurant is developing the operating budget for next
year using the following financial information from the current year:
Current Year's
Amount
Operations Budgeting and Cost-Volume-Profit Analysis 141
Food revenue
Beverage revenue
Food cost
Beverage cost
Labor (including benefits)
Other operating costs
Fixed costs
Food revenue
Food cost
$973,000
$112,500
Entertainment
Advertising
Utilities
36%
23%
$298,000
16%
$70,000
a. What is the current year's budgeted profit (loss)?
b. Develop next year's budget: indicate the profit (loss).
Problem 3
Payroll
Payroll taxes/benefits
Direct operating expenses
Next Year's Percentage
Increase (Decrease)
Assume the approved food operations budget for the Hilotown Restaurant for 20X1 is as
follows:
4%
2%
1%
$
1,400,000
434,000
364,000
42,000
112,000
14,000
42,000
770.000
(1%)
(2%)
same
same
Next Year's
Amount ($)
% of Revenue
100
38833889
31
26
Transcribed Image Text:. . Item . Decrease beverage costs to 20% Decrease payroll costs to 32% (but benefit costs will increase by 6% over the initial budget because of new payroll taxes not included in the original budget) Decrease operating expenses to 12% of total revenue (Fixed costs will remain at the same dollar amount as in the original budget.) c. What is the revised estimate of budgeted profit before tax? Problem 2 The manager of the Spartan Land Restaurant is developing the operating budget for next year using the following financial information from the current year: Current Year's Amount Operations Budgeting and Cost-Volume-Profit Analysis 141 Food revenue Beverage revenue Food cost Beverage cost Labor (including benefits) Other operating costs Fixed costs Food revenue Food cost $973,000 $112,500 Entertainment Advertising Utilities 36% 23% $298,000 16% $70,000 a. What is the current year's budgeted profit (loss)? b. Develop next year's budget: indicate the profit (loss). Problem 3 Payroll Payroll taxes/benefits Direct operating expenses Next Year's Percentage Increase (Decrease) Assume the approved food operations budget for the Hilotown Restaurant for 20X1 is as follows: 4% 2% 1% $ 1,400,000 434,000 364,000 42,000 112,000 14,000 42,000 770.000 (1%) (2%) same same Next Year's Amount ($) % of Revenue 100 38833889 31 26
Expert Solution
Step 1

Budgeted Profit

A business's budgeted profit calculation serves as a forecast of its financial performance. The business owner creates a budget based on anticipated income and the costs necessary to obtain that revenue at the beginning of each fiscal period. The budget should account for costs such planned expenses and capital expenditure repayments in order to determine the possible profit for the time. However, as assets and depreciation relate to the overall value of the business rather than the profit for a particular time, they may be removed from this computation.

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