Question

Carreras Café is a Spanish restaurant in a college town. The owner expects that the number of meals served in June will be 50 percent below those served in May, because so many students leave for the summer. In May, the restaurant served 4,700 meals at an average price of $20. In the summer (June through August), the average price of a meal typically increases by 35 percent and the average food cost of a meal increases by 10 percent. Other costs are typically unchanged during the summer. The following cost information is available for May.

Service costs (variable with respect to meals)
Variable service costs (with respect to meals)
Food costs	$	10,400
Labor		16,100
Other variable costs		6,500
Fixed service costs		8,800
Total service costs	$	41,800
Marketing and administrative costs
Marketing (variable with respect to meals)		6,800
Administrative (fixed)		4,600
Total marketing and administrative costs	$	11,400
Total costs	$	53,200

Required:

Prepare a budgeted income statement for June. (Do not round intermediate calculations.)

Answer 1

Carreras Café
Budgeted Income Statement for June
Particulars	Amount in $
Revenue - Refer Note 1	63,450
Less: Food cost ($10,400 x 50% x 1.10)	5,720
Less: Labor ($16,100 x 50%)	8,050
Less: Other variable cost ($6,500 x 50%)	3,250
Less: Fixed service cost (Same as May since it is fixed in nature and unchanged)	8,800
Less: Marketing cost (Variable) ($6,800 x 50%)	3,400
Less: Administrative cost (Fixed)	4,600
Budgeted income for June	29,630
Note 1: Calculation of budgeted revenue for June
Meals to be served in June = 4,700 meals x 50% = 2,350 meals
Budgeted sale price per meal = $20 + 35% of $20 = $27
Budgeted revenue for June = 2,350 meals @ $27 = $63,450