Danny is the owner of the Repas French restaurant. The restaurant does good volume, but due to a very weak local economy, Danny is considering promotions and price reductions next year that would, on average, reduce both his food and beverage prices by $5$ percent. He is hoping that such price reductions can allow him to maintain his current sales level by attracting new customers as well as encouraging his current customers to dine with him more frequently.

Danny$$s P&L for last year is shown. Using the cost$$related assumptions that follow, complete this year$$s $($current price$)$ and next year$$s $($with $5$ percent price decrease$)$ forecasted P&L$,$ and then answer the questions that follow.

Danny$$s assumptions with a $5$ percent decrease in prices and very careful cost control are:

Food cost percent will increase from $28$ to $30$ percent of food sales.

Beverage cost percent will increase from $20$ to $22$ percent of beverage sales.

There will be no change in labor cost or other operating expense.

Due to increased numbers of guests served, there will be no reduction in total food and beverage revenue.Repas Restaurant Budget Worksheet for Next Year

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