Question

Moores Familay Restaurant Financial Data		2017	2018 (Present Day)	2019 Budget Forecast
Budget Worksgheet
Sales		$1,642,896	$1,766,296	Answer to number 17
Cost of Product		$697,211	$597,211	Answer to number 18
Labor		$330,772	$340,695	Answer to number 19
Benefits		$79,872	$114,519	Answer to number 20
Utilities		$54,340	$50,644	$58,241
Loan Principle Repayments		$0	$0	$0
Insurance & Property Taxes		$110,000	$110,000	$110,000
Services (accounting, trash, cleaning, etc.)		$41,051	$43,908	Answer to number 21
Other: SG&A, advertising, promostions		$77,629	$84,771	$93,248
Total Costs		$1,390,875	$1,341,748	Answer to number 22
Earnings Before Interest, Income Taxes, & Depreciation (EBITD)		$252,021	$424,548	Answer to number 23
Interest on loan		$3,500	$3,000	$3,000
Income Taxes		$70,566	$118,873	#VALUE!
Depreciation on values		$71,176	$61,777	$61,177
Earnings After Interest, Income Taxes, & Depreciation		$106,779	$240,897	#VALUE!
Meals Sold		243,392	252,328	272,514
Average Meal Value		6.75	7.00	7.35

Use data below for questions 17-23 in this section and the data in the MS Excel attachment to calculate a budget for 2019. Hint: You may find it helpful to create a “standard” P&L which states all data as a percent of sales. Some “planning” questions will provide all needed data in the questions themselves.

Mr. Moore believes that roughly 8% more meals can be served in 2019 (due to the new strategy kicking into high gear) so he plans to serve 272,514 meals in 2019. He also plans to adjust prices so an average meal will be $7.35 per meal. Hint: “Sales” have been calculated as number of meals served x average price per meal.

The consulting team believes that the cost of product (calculated as a percent of sales) can be 35% of sales in 2019. Mr. Moore wants to keep the good staff he hires and so is planning to give “cost of living raises” of 2.5% over 2018 in the next year. Benefits will remain at the current 35% of the labor cost next year. The utility companies have advised all business customers that rates will increase by 15% next year.

According to the loan agreement, there will be no repayment of principle on the revolving line of credit (since we are currently in the draw period). Hence payments being made are just interest payments which are expected to be $3,000 total in 2019.* Because of agreements with the city and the insurance company (from whom he received his loan) taxes and insurance will remain the same in 2019.* Likewise depreciation expense will remain the same as in 2014.*

Service costs are expected to grow by 15% next year plus an added $55,000 is to be budgeted for extra accounting services. Other Expenses (GSA, advertising and promotion and other) are expected to increase by 10% from 2018. The heavy advertising of the new restaurant should not be necessary and there’s been time to plan for some other efficiencies. The income tax rate is expected to be 28% of EBITD which is reduced for interest and depreciation, the same percent of EBITD as in 2018.

* These values have been entered on the worksheet; there is no need to calculate these amounts. Calculate and enter only those amounts on the exam with question numbers’ shown.

1. What is to be the Sales budget for 2019?
2. What is to be the Cost of Product for 2019?
3. What is to be the Labor budget for 2019?
4. What is to be the Benefits budget for 2019?
5. What is to be the Cost of Services for 2019?
6. What are Total Costs to be budgeted for 2019?
7. What are Earnings before Interest, Taxes and Depreciation (EBITD) to be for 2019?

Answer 1