C A S E a. With reference to the financial statements prepared for the 4C Company for Year 2007 (see Case 2), prepare a common-size vertical statement. The local restaurant association provided Charlie with statistical data that are applica 134 CHAPTER 3 ANALYSIS AND NTERPRETATION OF FINANCIAL STATEMENTS ble for a table service, family-oriented, lunch and dinner restaurant similar to his (sce below). The data provide percentage ranges for typical clements 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. Sales Revenue Low gh Food operations 68.0 84.0 Beverage operations 6.0 33.0 Total Sales Revenue Cost of sales, food 30.0% 40.0% Cost of sales, beverages 17.0% 33.0% Total Cost of Sales 35.0% 44.0% Gross Margin 62.0% 71.0% operating Expenses 31.0% Wages expenses 26.0% Salaries expense 2.0% 6.0% Employee benefits expense 3.0% 5.0% 2.0% Employee meals expense 1.0% Laundry, linen, uniforms expense .5% 2.0% Replacements expense 0.5% .0% Services supplies expense 1.0% 2.0% Menus, printing expenses 0.3% 0.5% Miscellaneous expense 0.3% 0.5% Entertainment expensc 0.5% 2.0% Advertising, promotion expense 0.7% 2.5% Utilities expenses 2.0% 4.0% Administrative expenses 3.0% 6.0% Repairs, maintenance expense 1.0% 2.0% Rent expense 4.5% 7.0% Property taxes expense 0.5% 1.5% 0.8% 1.0% expense 0.3% 1.0% Interest expense Depreciation expense 2.0% 2.8% Franchise expense (if applicable) 3.0% 8.0% Total operating Expenses 51.5% 62.5% operating Income (before tax) 1.5% 12.0% b. The guest count (covers) for the 4C restaurant for the year was 66,612. De- termine the overall average check (sales revenue) for food and beverages. In your opinion, does the average check for food and beverages appear reason- able 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 cost of sales for food, beverages, and the total cost of sales compare 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? C A S E a. With reference to the financial statements prepared for the 4C Company for Year 2007 (see Case 2), prepare a common-size vertical statement. The local restaurant association provided Charlie with statistical data that are applica 134 CHAPTER 3 ANALYSIS AND NTERPRETATION OF FINANCIAL STATEMENTS ble for a table service, family-oriented, lunch and dinner restaurant similar to his (sce below). The data provide percentage ranges for typical clements 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. Sales Revenue Low gh Food operations 68.0 84.0 Beverage operations 6.0 33.0 Total Sales Revenue Cost of sales, food 30.0% 40.0% Cost of sales, beverages 17.0% 33.0% Total Cost of Sales 35.0% 44.0% Gross Margin 62.0% 71.0% operating Expenses 31.0% Wages expenses 26.0% Salaries expense 2.0% 6.0% Employee benefits expense 3.0% 5.0% 2.0% Employee meals expense 1.0% Laundry, linen, uniforms expense .5% 2.0% Replacements expense 0.5% .0% Services supplies expense 1.0% 2.0% Menus, printing expenses 0.3% 0.5% Miscellaneous expense 0.3% 0.5% Entertainment expensc 0.5% 2.0% Advertising, promotion expense 0.7% 2.5% Utilities expenses 2.0% 4.0% Administrative expenses 3.0% 6.0% Repairs, maintenance expense 1.0% 2.0% Rent expense 4.5% 7.0% Property taxes expense 0.5% 1.5% 0.8% 1.0% expense 0.3% 1.0% Interest expense Depreciation expense 2.0% 2.8% Franchise expense (if applicable) 3.0% 8.0% Total operating Expenses 51.5% 62.5% operating Income (before tax) 1.5% 12.0% b. The guest count (covers) for the 4C restaurant for the year was 66,612. De- termine the overall average check (sales revenue) for food and beverages. In your opinion, does the average check for food and beverages appear reason- able 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 cost of sales for food, beverages, and the total cost of sales compare 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
