**Managerial Accounting - Bottoms Up Approach to Pricing**---### #2 Prepare Projected Income Statement (Incomplete)#### Income Statement Components| Category | $ | % ||---------------------------------|--------------|-------|| **Sales Revenue** | Unknown | 100% || **COS - Food and Beverage** | | || **Labor** | | || **Other Operating VC** | | || **Total Variable Cost %** | | || **Depreciation** | | || **Rent** | | || **Insurance/License** | | || **Utilities/Maintenance** | | || **Administrative** | | || **Management Salary** | | || **Income Tax** | | || **Net Income** | | || **Total** | | || **Total Costs as a % Sales Rev**| | 100% |---### #3 Prepare Condensed Projected Income Statement#### Income Statement Components| Category | ||----------------------------------------|------|| **Sales Revenue** | || **Variable Costs (Food, Bev, Labor, Other)** | || **Contribution Margin** | || **Total Operating Costs** | || **Operating Income (BT)** | || **Income Tax** | || **Net Income** | |---### #4 Solve for Average Check Projections by Meal Period to Support Projected Sales RevenueKnowing the forecasted sales revenue allows businesses to accurately forecast overall average check and average check by meal period. This information is crucial for the budgeting process and strategic pricing strategies.- **Average Check by Meal Period =** (Revenue generated from meal period) / (Seats x T/O x number days open)- **Seat Turnover =** # guests or covers / # seats in operation or available(Can be calculated by Meal Period or Day)---Page 4 and 5 of the document illustrate a structured approach to prepare projected and condensed income statements, focusing on identifying and analyzing key financial components. The exercise also demonstrates how to compute average check projections, integral for pricing strategies. Certainly, here’s the transcribed and detailed explanation of the content:---## Practice Problem #2:- **Desired Net Income:** Owners want a 23% after-tax return on a $250,000 investment of new FF&E.- **Income Tax Rate:** 37% of operating income before tax.- **Depreciation:** 10% of the book value of the $250,000 of FF&E.- **Annual Costs:** - Rent: $50,000 - Insurance/Licenses: $6,000 - Utilities/Maintenance: $7,500 - Administrative: $15,500 - Management Salary: $40,000- **Variable Costs:** - COS Food and Beverage: 41% (Too High) - Labor: 31% - Other: 6%### #1 Identify Projected Costs1. **Desired Net Income after Tax:**2. **Income Tax:**3. **Known Annual Costs ($):** - Depreciation - Rent - Insurance/License - Utilities/Maintenance - Administrative - Management Salary4. **Total Known Annual Costs:**5. **Variable Costs (% of Sales):** - COS - Food and Beverage - Labor - Other Operating Variable Costs**Managerial Accounting - Bottoms Up Approach to Pricing**---### #2 Prepare Projected Income Statement (Incomplete)| | $ | % ||------------------|--------|---------|| **Sales Revenue** | Unknown | 100% || **COS - Food and Beverage** | | || **Labor** | | || **Other Operating VC** | | || **Total Variable Cost %** | | || **Depreciation** | | || **Rent** | | |The document appears to be part of a worksheet for a managerial accounting exercise focusing on pricing strategies. The goal is to project financial outcomes and understand cost structures to achieve desired profitability. #### Explanation of Tables and Notes:- The first table itemizes both fixed and variable costs that need to be projected, allowing students to understand the components of cost and how they impact net income.- The second section outlines an incomplete income statement where students must fill in missing details, giving

Practice Problem #2: Desired Net Income: Owners want a 23% after tax return on a $250,000 investment of new FF&E • Income Tax Rate: 37% of operating income before tax • Depreciation of 10% of the book value of the $250,000 of FF&E • Annual Costs: Rent=$50,000, Insurance/Licenses=$6,000, Utilities/Maintenance=$7,500, Administrative=$15,500, • Variable Costs-cos Food and Beverage 41% (Too High!), Labor=31%, Other=6% Management Salary=$40,000 1 Identify Projected Costs Desired Net Income after Tax Income Tax: Known Annual Costs ($5): Depreciation Rent Insurance License Utilities/Maintenance Administrative Management Salary Total Known Annual Costs Variable Costs (% of Sales) COS - Food and Beverage Labor Other Operating Variable Costs

Practice Problem #2: Desired Net Income: Owners want a 23% after tax return on a $250,000 investment of new FF&E • Income Tax Rate: 37% of operating income before tax • Depreciation of 10% of the book value of the $250,000 of FF&E • Annual Costs: Rent=$50,000, Insurance/Licenses=$6,000, Utilities/Maintenance=$7,500, Administrative=$15,500, • Variable Costs-cos Food and Beverage 41% (Too High!), Labor=31%, Other=6% Management Salary=$40,000 1 Identify Projected Costs Desired Net Income after Tax Income Tax: Known Annual Costs ($5): Depreciation Rent Insurance License Utilities/Maintenance Administrative Management Salary Total Known Annual Costs Variable Costs (% of Sales) COS - Food and Beverage Labor Other Operating Variable Costs

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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