Question

2. Su Chan manages a Chinese restaurant called the Bungalow. Her P&L for the month of March is as follows: (see chart for information). Su has a meeting with the owner of the Bungalow next week, so she has decided to create a pie chart showing the percentage of her costs in relation to her total sales (see the following diagram).

Revenue $100,000.00 100.0%

34,000.00 34.0%

Labor Expense 40,000.00 40.0%

Other Expense 21,000.00 21.0%

Total Expenses $95,000.00 95.0%

Profit $5,000.00 5.0%

At the meeting with the owner, Su is asked to change the information on the pie chart to reflect next month’s projections.

Revenue $120,000.00 120.0%

44,000.00 44.0%

Labor Expense 40,000.00 40.0%

Other Expense 21,000.00 21.0%

Total Expenses 105,000.00 105.0%

Profit $15,000.00 15.0%

Revenue $120,000.00 120.0%

44,000.00 44.0%

Labor Expense 50,000.00 50.0%

Other Expense 19,000.00 19.0%

Total Expenses 113,000.00 113.0%

After looking at the owner’s projections, Su thinks it might be too difficult (and not so good for her guests) to increase sales without also increasing labor costs. She proposes a compromise and tells the owner that if he will agree to increased labor costs, she will try to decrease other expenses. So, Su proposes the following: April revenues = $120,000. Food and beverage costs = $44,000. Labor expense = $50,000. Other expense = $19,000. Using these numbers, is the owner’s profit percentage going to be higher or lower than that in March? By how much? Which set of projections has more reasonable goals?

Answer 1