Question
Watson Walbert has been the executive chef at the Altine Restuarant for five years. Altine restaurant is located in a dry area (alcoholic beverage sales
Watson Walbert has been the executive chef at the Altine Restuarant for five years. Altine restaurant is located in a "dry" area (alcoholic beverage sales are illegal), so it only sells food. In the last five years, Watson has worked for several general managers. The new general manager, however, is a real stickler for staying in budget, and at the moment Watson is a bit worried. According to the November's Spreadsheet, the general manager sent Watson, had exceeded his food cost budget significantly. He felt that his team had performed well, but according to the memo he got from the owner, he still had to explain his department's "sub-par" performance to the owner in person.
Watson is confused, though. Although he spends more on food cost, he also sold more covers, so his food cost should be higher than originally budgeted. Watson decides to calculate a flexible budget based on his actual number of covers sold to see if he has, indeed, had cost control problems in any of his line items, especially food cost. Help him calculate his flexible budget, and then answer the question that follows
Altina Restaurant | ||||||||
Flexible Budget For November | ||||||||
November original budget number of covers | 18,000 | November original budget check average | $ 9.00 | |||||
November actual number of covers | 21,000 | November actual check average | ||||||
Variable Dollars Per Cover | Original Budget | Flexible Budget | Actual | Variance | Favorable | Unfavorable | ||
NUMBER OF COVERS | 18,000 | 21,000 | 21,000 | |||||
Sales: Food | $ 9.00 | $ 162,000 | $ 200,000 | |||||
LESS VARIABLE COSTS | ||||||||
Food Cost | $ 3.12 | $ 56,160 | $ 60,500 | |||||
Management, Staff, and Benefits | $ 1.25 | $ 22,500 | $ 22,000 | |||||
Telephone | $ 0.02 | $ 360 | $ 575 | |||||
Marketing | $ 0.08 | $ 1,440 | $ 1,750 | |||||
Utilities | $ 0.14 | $ 2,520 | $ 2,500 | |||||
Repairs and Maintenance | $ 0.11 | $ 1,980 | $ 2,600 | |||||
Contribution Margin | $ 4.28 | $ 77,040 | $ 110,075 | |||||
LESS FIXED COSTS | ||||||||
Management, Staff, and Benefits | $ 28,800 | $ 28,800 | $ 28,800 | 0 | ||||
Telephone | $ 360 | $ 360 | $ 360 | 0 | ||||
Marketing | $ 5,400 | $ 5,400 | $ 5,400 | 0 | ||||
Utilities | $ 3,600 | $ 3,600 | $ 3,600 | 0 | ||||
Repairs and Maintenance | $ 150 | $ 150 | $ 150 | 0 | ||||
Administrative and General | $ 2,000 | $ 2,000 | $ 2,000 | 0 | ||||
Depreciation | $ 1,000 | $ 1,000 | $ 1,000 | 0 | ||||
Occupancy Costs | $ 5,000 | $ 5,000 | $ 5,000 | 0 | ||||
INCOME BEFORE TAXES | $ 30,730 | $ 63,765 | ||||||
Taxes Rate | 40% | $ 12,292 | $ 25,506 | |||||
NET INCOME | $ 18,438 | $ 38,259 | ||||||
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