A restaurants average monthly income statement is as follows: The owner is considering two possible alternatives for
Question:
A restaurant’s average monthly income statement is as follows:
The owner is considering two possible alternatives for the coming year:
By improving purchasing and reducing portions, cutting the food cost from 45 percent to 40 percent of food sales revenue. There would be no other changes.
Cutting the food costs from 45 percent to 40 percent of food sales revenue and spending an additional $2,000 a month on advertising. It is estimated that the advertising would bring in extra customers and increase the volume of both food and beverage revenue by 20 percent over current levels. The extra customers would also incur extra costs over current levels as follows:
Prepare budgeted average monthly income statements for both alternatives and advise the owner which alternative you consider the best, and why.
Step by Step Answer:
Hospitality Management Accounting
ISBN: 9780471092223
8th Edition
Authors: Martin G Jagels, Michael M Coltman