Question
a. With reference to the financial statements prepared for the 4C Company for the Year 2007 (see Case 2), prepare a common-size vertical statement. The
a. With reference to the financial statements prepared for the 4C Company for the Year 2007 (see Case 2), prepare a common-size vertical statement. The local restaurant association provided Charlie with statistical data that are applicable for table service, family-oriented, lunch and dinner restaurant similar to his (see below). The data provide percentage ranges for typical elements of an income statement. Comment on how the operating income (before tax) of the 4C restaurant compares to similar restaurants. Is the comparison valid? Explain.
b. The guest count (covers) for the 4C restaurant for the year was 66,612. Determine the overall average check (sales revenue) for food and beverages. In your opinion, does the average check for food and beverages appear reasonable for a budget-conscious, family-type table service restaurant?
c. Calculate the cost percentages for food cost, beverage cost, and the total cost of sales as a percentage of total sales revenue. How does the cost of sales for food, beverages, and the total cost of sales compared to the ranges provided for a restaurant of this type?
d. Given the choice, would it be better to have a higher or lower percentage of beverage sales revenue compared to food sales revenue?
Credit 4C Company Unadjusted Trial Balance December 31, 2007 Accounts Debit Cash $ 36,218 Credit card receivables 13,683 Accounts receivable 3,421 Inventories, food 6,128 Inventories, beverages 3,207 Prepaid insurance 2,136 Equipment 171,524 Furnishings 53,596 Accounts payable Bank loan payable Common stock Sales revenue, food operations Sales revenue, beverage operations Purchases, food (net) 181,110 Purchases, beverages (net) 38,307 Salaries and wages expense 221,328 Laundry expense 16,609 Kitchen fuel expense 7,007 China and tableware expense 12,214 Glassware expense $ 1,605 Contract cleaning expense 5,906 Licenses expense 3,205 Misc. operating expenses 4,101 Administrative-general expenses 15,432 Marketing expenses 6,917 Utilities expense 7,918 Insurance expense 1,895 Rental expense 24,000 Interest expense 23,981 Unadjusted Trial Balance Totals $861,448 $ 8,819 163,518 50,000 458,602 180,509 $861,448 Low (%) 68.0 16.0 High (%) 84.0 33.0 100% 30.0% 17.0% 35.0% 62.0% 40.0% 33.0% 44.0% 71.0% Sales Revenue Food operations Beverage operations Total Sales Revenue Cost of sales, food Cost of sales, beverages Total Cost of Sales Gross Margin Operating Expenses Wages expense Salaries expense Employee benefits expense Employee meals expense Laundry, linen, uniforms expense Replacements expense Services supplies expense Menus, printing expense Miscellaneous expense Entertainment expense Advertising, promotion expense Utilities expense Administrative expense Repairs, maintenance expense Rent expense Property taxes expense Insurance expense Interest expense Depreciation expense Franchise expense (if applicable) Total Operating Expenses Operating Income (before tax) 26.0% 2.0% 3.0% 1.0% 1.5% 0.5% 1.0% 0.3% 0.3% 0.5% 0.7% 2.0% 3.0% 1.0% 4.5% 0.5% 0.8% 0.3% 2.0% 3.0% 51.5% 1.5% 31.0% 6.0% 5.0% 2.0% 2.0% 1.0% 2.0% 0.5% 0.5% 2.0% 2.5% 4.0% 6.0% 2.0% 7.0% 1.5% 1.0% 1.0% 2.8% 8.0% 62.5% 12.0% Credit 4C Company Unadjusted Trial Balance December 31, 2007 Accounts Debit Cash $ 36,218 Credit card receivables 13,683 Accounts receivable 3,421 Inventories, food 6,128 Inventories, beverages 3,207 Prepaid insurance 2,136 Equipment 171,524 Furnishings 53,596 Accounts payable Bank loan payable Common stock Sales revenue, food operations Sales revenue, beverage operations Purchases, food (net) 181,110 Purchases, beverages (net) 38,307 Salaries and wages expense 221,328 Laundry expense 16,609 Kitchen fuel expense 7,007 China and tableware expense 12,214 Glassware expense $ 1,605 Contract cleaning expense 5,906 Licenses expense 3,205 Misc. operating expenses 4,101 Administrative-general expenses 15,432 Marketing expenses 6,917 Utilities expense 7,918 Insurance expense 1,895 Rental expense 24,000 Interest expense 23,981 Unadjusted Trial Balance Totals $861,448 $ 8,819 163,518 50,000 458,602 180,509 $861,448 Low (%) 68.0 16.0 High (%) 84.0 33.0 100% 30.0% 17.0% 35.0% 62.0% 40.0% 33.0% 44.0% 71.0% Sales Revenue Food operations Beverage operations Total Sales Revenue Cost of sales, food Cost of sales, beverages Total Cost of Sales Gross Margin Operating Expenses Wages expense Salaries expense Employee benefits expense Employee meals expense Laundry, linen, uniforms expense Replacements expense Services supplies expense Menus, printing expense Miscellaneous expense Entertainment expense Advertising, promotion expense Utilities expense Administrative expense Repairs, maintenance expense Rent expense Property taxes expense Insurance expense Interest expense Depreciation expense Franchise expense (if applicable) Total Operating Expenses Operating Income (before tax) 26.0% 2.0% 3.0% 1.0% 1.5% 0.5% 1.0% 0.3% 0.3% 0.5% 0.7% 2.0% 3.0% 1.0% 4.5% 0.5% 0.8% 0.3% 2.0% 3.0% 51.5% 1.5% 31.0% 6.0% 5.0% 2.0% 2.0% 1.0% 2.0% 0.5% 0.5% 2.0% 2.5% 4.0% 6.0% 2.0% 7.0% 1.5% 1.0% 1.0% 2.8% 8.0% 62.5% 12.0%Step by Step Solution
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