Problems Problem 1 The total ingredient (food) cost in a recipe is $4.73; the manager desires a 37.5-percent food Should the manager price the item in the above example at the base selling price you cost. What is the base selling price of the item using the ingredients mark-up method? calculated? Why or why not? Problem 2 The chef has precosted the recipe for an entrée and a sauce, which is one item on the menu, the food cost is $6.34. A prime ingredient multiplier of 3.72 has been established. What is the base selling price when the prime ingredient mark-up method is used? Problem 3 The Prairie Town Grill does not serve alcoholic beverages. Its operating budget reveals the following: $1,375,000 $585,000 $710,000 $80,000 161,580 $8.51 $790,000 (revenue - food costs) Using the above information, calculate the base selling price of a menu item with a total ingredient cost of $4.85 using: . . Revenue Food cost Non-food costs Profit Number of guests Guest check average Contribution margin a. The contribution margin pricing method. b. The ratio pricing method. c. The simple prime costs method (note: the non-food costs include $426,250 in labor costs). Problem 4 The manager uses the mark-up with accompaniment cost method to establish a base selling price. What is that i ark-up The Menu: The Foundation for Control 105 Use the pricing methods. Note: the item to be priced has a food cost of $4.57 (entrée cost = $3.12- plate cost $1.45) a. What is the approximate base selling price using the ingredients mark-up method? b. What is the approximate base selling price using the prime ingredient mark-up method? c. What is the approximate base selling price using the mark-up with accompanimen costs method? d. What is the approximate base selling price using the contribution margin pricing method? e. What is the approximate base price using the ratio pricing method? f. What is the approximate base selling price using the simple prime costs method? Problem 6 Complete the menu engineering worksheet on the following page. Suggest strategies effectively manage each item after the worksheet is completed.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Do problem 3
104 Chapter 3
Problems
Problem 1
The total ingredient (food) cost in a recipe is $4.73; the manager desires a 37.5-percent food
cost. What is the base selling price of the item using the ingredients mark-up method
Should the manager price the item in the above example at the base selling price you
calculated? Why or why not?
Problem 2
The chef has precosted the recipe for an entrée and a sauce, which is one item on the menu,
the food cost is $6.34. A prime ingredient multiplier of 3.72 has been established. What is the
base selling price when the prime ingredient mark-up method is used?
Problem 3
The Prairie Town Grill does not serve alcoholic beverages. Its operating budget reveals the
following:
Revenue
Food cost
Non-food costs
Profit
Number of guests
Guest check average
Contribution margin
$1,375,000
$585,000
$710,000
$80,000
161,580
$8.51
$790,000 (revenue - food costs)
Using the above information, calculate the base selling price of a menu item with a total
ingredient cost of $4.85 using:
a. The contribution margin pricing method.
b. The ratio pricing method.
c. The simple prime costs method (note: the non-food costs include $426,250 in labor
costs).
Problem 4
The manager uses the mark-up with accompaniment cost method to establish a base selling
price. What is that price when the entrée cost is $2.12, the plate cost is $1.70, and the mark-up
multiplier is 2.1?
Problem 5
The manager of the University Square Bistro has the following operating data available:
Revenue
Food cost
Labor cost
Other non-food costs
Desired profit
Number of guests
$1,187,000
$403,580 (includes entrée costs of $274,434)
$367,970
$316,550 (excludes labor)
$98,900
107,900
The Menu: The Foundation for Control 105
Use the above information to establish the base selling price of a menu item with alternative
pricing methods. Note: the item to be priced has a food cost of $4.57 (entrée cost = $3.12;
plate cost = $1.45)
a. What is the approximate base selling price using the ingredients mark-up method?
b. What is the approximate base selling price using the prime ingredient mark-up
method?
What is the approximate base selling price using the mark-up with accompaniment
costs method?
d. What is the approximate base selling price using the contribution margin pricing
method?
e. What is the approximate base price using the ratio pricing method?
f. What is the approximate base selling price using the simple prime costs method?
Problem 6
Complete the menu engineering worksheet on the following page. Suggest strategies to
effectively manage each item after the worksheet is completed.
Transcribed Image Text:104 Chapter 3 Problems Problem 1 The total ingredient (food) cost in a recipe is $4.73; the manager desires a 37.5-percent food cost. What is the base selling price of the item using the ingredients mark-up method Should the manager price the item in the above example at the base selling price you calculated? Why or why not? Problem 2 The chef has precosted the recipe for an entrée and a sauce, which is one item on the menu, the food cost is $6.34. A prime ingredient multiplier of 3.72 has been established. What is the base selling price when the prime ingredient mark-up method is used? Problem 3 The Prairie Town Grill does not serve alcoholic beverages. Its operating budget reveals the following: Revenue Food cost Non-food costs Profit Number of guests Guest check average Contribution margin $1,375,000 $585,000 $710,000 $80,000 161,580 $8.51 $790,000 (revenue - food costs) Using the above information, calculate the base selling price of a menu item with a total ingredient cost of $4.85 using: a. The contribution margin pricing method. b. The ratio pricing method. c. The simple prime costs method (note: the non-food costs include $426,250 in labor costs). Problem 4 The manager uses the mark-up with accompaniment cost method to establish a base selling price. What is that price when the entrée cost is $2.12, the plate cost is $1.70, and the mark-up multiplier is 2.1? Problem 5 The manager of the University Square Bistro has the following operating data available: Revenue Food cost Labor cost Other non-food costs Desired profit Number of guests $1,187,000 $403,580 (includes entrée costs of $274,434) $367,970 $316,550 (excludes labor) $98,900 107,900 The Menu: The Foundation for Control 105 Use the above information to establish the base selling price of a menu item with alternative pricing methods. Note: the item to be priced has a food cost of $4.57 (entrée cost = $3.12; plate cost = $1.45) a. What is the approximate base selling price using the ingredients mark-up method? b. What is the approximate base selling price using the prime ingredient mark-up method? What is the approximate base selling price using the mark-up with accompaniment costs method? d. What is the approximate base selling price using the contribution margin pricing method? e. What is the approximate base price using the ratio pricing method? f. What is the approximate base selling price using the simple prime costs method? Problem 6 Complete the menu engineering worksheet on the following page. Suggest strategies to effectively manage each item after the worksheet is completed.
Expert Solution
Step 1

Contribution Margin is a specific term in the organization because it shows how much money from the sale of goods generate to cover fixed costs. All variable costs should be deducted from the sales price to get the contribution margin, and the balance is the contribution margin.

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