1. Nicole Englezakis manages a South African restaurant in a large southern city. The owner wants to know how well Nicole did this year at generating sales, controlling expenses, and providing a profit. Complete Nicole's P&L using vertical analysis. Nicole's P&L Last Year % This Year SALES: $3,706,381 $647,555 $3,746,245 1,255,358 1,282,656 1,611,630 162,231 145,607 Food Beverage Total Sales COST OF SALES: Food Beverage Total Cost of Sales GROSS PROFIT: Food Beverage Total Gross Profit OPERATING EXPENSES: Salaries and Wages Employee Benefits Direct Operating Expenses Music and Entertainment Marketing Utility Services Repairs and Maintenance 2,423,725 501,948 2,134,615 1,093,127 1,230,910 1,256,779 196,790 232,571 13,418 190,394 234,670 4,427 84,126 141,688 66,416 111,813 156,538 62,616 Administrative and General 125,230 128,403 230,400 Occupancy 211,200 98,397 Depreciation 79,699 Total Operating Expenses Operating Income Interest Income Before Income Taxes 166,560 149,405 147,192 245,194 Income Taxes Net Income a. When comparing this year to last year, was Nicole's marketing expense in dollars higher or lower? b. Was Nicole's marketing expense % higher or lower this year? C. Do you think that her marketing expense this year positively or negatively contributed to her revenues? Why? d. When comparing this year to last year, was Nicole's salaries and wages expense in dollars higher or lower? e. Was Nicole's salaries and wages expense % higher or lower this year? f. Do you think that her salaries and wages expense this year positively or negatively contributed to her net income? Why? g. The owner promised Nicole that he would give her a raise if she increased profit margin by at least 2%. Should Nicole receive a raise? Why or why not? 2. Terry Ray manages a hotel in an urban Midwestern city. He wants to use vertical analysis in order to evaluate his income statement (P&L). Complete the spreadsheet to help him evaluate his effectiveness as a manager. 5,100,350 3,000,000 535,600 229,450 Terry's P&L Total Revenue Rooms-Revenue Payroll and Related Expenses Other Expenses Department Income Food -Revenue Cost of Sales Payroll and Related Expenses Other ExpePage 127 Department Income 1,400,000 1386.100 395,200 530 200 560,000 81,510 96,590 36,400 14,000 30,550 9,750 5,200 105,000 14,300 11,700 21,350 2,860 8,840 1,950 Beverage-Revenue Cost of Sales Payroll and Related Expenses Other Expenses Department Income Telecommunications-Revenue Cost of Sales Payroll and Related Expenses Other Expenses Department Income Other Operated Departments - Revenue Cost of Sales Payroll and Related Expenses Other Expenses Department Income Rentals and Other Income-Revenue Cost of Sales Payroll and Related Expenses Other Expenses Department Income Total Operated Department Income Undistributed Operating Expenses Administrative and General Information Systems Human Resources Security Franchise Fees Transportation Marketing Property Operations and Maintenance Utility Costs Total Undistributed Operating Expenses Gross Operating Profit Rent, Property Taxes, and Insurance Depreciation and Amortization Net Operating Income Interest Income Before Income Taxes Income Taxes Net Income 245,050 64,350 105,300 50,050 O 60,450 280,280 216,125 193,375 317,850 227,500 136,500 491,528 a. The owner gave Terry a goal of 65% total operated department income. Did Terry perform better or worse than this goal? By how much? b. The owner also gave Terry a goal of 22% total undistributed operating expenses. Did Terry perform better or worse than this goal? By how much? c. Finally, the owner gave Terry a goal of 20% profit margin for the year. Did Terry perform better or worse than this goal? By how much? d. If you answered that Terry did not meet his goal in question c, what could he do to get his P&L in line with the owner's goals? 4. Haroun Jackson is the chief engineer of a large hotel in New England. Her general manager has asked her to complete her Property Operations and Maintenance Expense Schedule to determine the detailed costs for her department. Help Haroun complete her schedule. Haroun's Property Operations and Maintenance Expense Schedule % of Property Operations and Maintenance Expenses Expense Type of Expense Payroll and Related Expenses Chief Engineer Engineer Assistants Benefit Allocation Total Payroll 8,637 22,163 13,750 Other Expenses Computer Equipment Equipment Rental Electrical & Mechanical Equipment Elevators Elevator Repairs Engineering Supplies Floor Covering 3,108 7,700 15,565 4,620 1,540 1,925 5,058 21,010 6,160 15,675 979 616 1,650 7.238 875 1,562 4,708 Furniture Grounds HVAC Kitchen Equipment Laundry Equipment Light Bulbs Maintenance Contracts Operating Supplies Painting & Decorating Parking Lot Pest Control Plants & Interior Plumbing & Heating Refrigeration & AC Signage Repair Snow Removal Travel & Entertainment Telecommunications Trash Removal Uniforms Total Other Expenses Total Property Operations and Maintenance 2,365 1,628 9,790 10,780 5,881 10,835 1,045 968 3,080 2,904 a. What was Haroun's largest single expense as a percentage of total property operations and maintenance? b. What was Haroun's smallest single expense as a percentage of total property operations and maintenance ? c. Haroun purchased new furniture for her hotel lobby, but does not anticipate any furniture purchases next period. How might this affect her overall total property operations and maintenance expense next period