Question:

Prepare a monthly statement showing the current situation

Garden restaurant, which is part of a four-star hotel, currently serve 8,000 covers per month The average spend is $ 25.00 of which $ 21.00 is for food and the rest for beverage. Food is costed to give a gross profit of 60% of sales, and beverage to give a 50% gross profit. Labour costs are $ 6.00 per cover, other variable costs are $ 2.00 per cover and fixed costs in total are $ 25,000 per month. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Average Spending per customer Average Spending for food Average spending for beverage Food Cost of Sales Beverage Cost of Sales Labour costs Other variable costs Fixed costs per month $25 $21 Average spending per customer - Average spending for food 40% of Sale 50% of Sale $6 per cover $2 per cover $25,000 per month Variable costs - Fixed costs - In an effort to improve profitability whilst maintaining the existing food and beverage cost per cover, management are considering two alternative proposals: 23 Proposal A To introduce a cover charge of $ 1.00 and to increase all menu prices. As a result - food average spend would be expected to increase by 5% - beverage average spend would be expected to increase by 10% The number of covers per month is expected to fall by 500 Labour and other costs would increase by 10% but fixed costs would remain unchanged. 15% Proposal B To change the style of service. This is expected to reduce the labour costs by per cover and reduce the fixed costs by 5% A reduction in menu prices should lead to the average food spend decreasing by However, due to improved service and lower menu prices it is expected that the number of covers will rise by 15% $ 2.00