Operations Budgeting and Cost-Volume-Profit Analysis 141 Score Small Business Notes www.smallbusinessnotes.com Problems ge oper t percmta Problem 1 What is the initial budgeted profit (before tax) being planned by the Spartanland Res- taurant for the current year, given the following information? a. Revenue (food) Revenue (beverage) $135,000 Food cost 31% of food revenue Beverage cost Labor cost (payroll) ; 34% of total revenue Employee benefits = 18% of labor cost (payroll) Other operating expenses 14% of total revenue All fixed costs = 8% of total revenue $975,000 22% of beverage revenue * . The owner does not approve of the initial budget. Working together, the owner and manager believe they can accomplish the follow b. Implement marketing plans to increase the number of guests consuming food by an additional 12000 (guest check average Increase beverage revenues by 8% over initial estimates Decrease food costs to 30% Decrease beverage costs to 20% Decrease payroll costs to32% (but benefit costs will increase by 6% over the initial budget because of new payroll taxes not included in the original budget) Decrease operating expenses to 12% of total revenue S22.50) m-upbd ere a u t can b (Fixed costs will remain at the same dollar amount as in the original budget.) What is the revised estimate of budgeted profit before tax? c. Inteme usei -Problem,2-- The manager of the Spartanland Restaurant is developing the operating budget for next year using the following financial information from the current year n to th Current Years Next Year's Percentage Next Year's Amount Item Food revenue Beverage revenue Food cost Beverage cost $973,000 $112,500 36% 23% 2% 1%