Question

 

1. Thyme to Eat Restaurant has the following information:

Total Sales: $77,500

Food Sales: $62,000

Beverage Sales: $12,000

Other Sales: $3,500

Food Purchases: $19,500

Beverage Purchases: $3,250

Beginning Food Inventory: $14,000

Beginning Beverage Inventory: $2,700

Ending Food Inventory: $17,900

Ending Beverage Inventory: $3410

Labor Dollars Spent: $26,450

1. What is the Prime Cost in Percentage form?
2. What is the Food Cost percentage for this restaurant?
3. What is the Beverage cost percentage for this restaurant?
4. What is the labor cost percentage for this restaurant?
5. If the plate cost is $3.45 and you wanted a 32% Food Cost, what do you need to charge for this dish and what is the contribution margin for this dish?

Answer 1

Answer

Food Sales: $62,000 ----- (1A)

Beverage Sales: $12,000 ------ (2A)

Other Sales: $3,500 ---- (3A)

Total Sales: $77,500 --- (4)

Beginning Food Inventory: $14,000

Food Purchases: $19,500

Ending Food Inventory: $17,900

Therefore, Cost of Food = ($14,000 + $19,500) - $17,900 = $15,600 ---- (1B)

Beginning Beverage Inventory: $2,700

Beverage Purchases: $3,250

Ending Beverage Inventory: $3410

Therefore, Cost of Beverage = ($2,700 + $3,250) - $3410 = $2,540 ---- (2B)

Labor Dollars Spent: $26,450 --- (3B)

Therefore, Prime Cost = (1B) + (2B) + (3B)

                                    = $15,600 + $2,540 + $26,450 = $44,590 ---- (5)

Prime Cost Percentage = Prime Cost / Total Sales x 100

                        = {(5) / (4)} * 100 = {44590/ 77500} * 100 = 57.53%

Food Cost percentage = 100 * {(1B) / (5)} = 100 * {15600/ 44590} = 34.98% -- (6)

Beverage cost percentage = 100 * {(2B) / (5)} = 100 * {2540/ 44590} = 5.7% --- (7)

Labor Cost percentage = 100 * {(3B) / (5)} = 100 * {26450 / 44590} = 59.32% --- (8)

Contribution = total sales less total variable costs = (4) – (5)

                                    = $77,500 - $44,590 = $32,910   --- (9)

Contribution per unit = selling price per unit less variable costs per unit

                        = $3.45 – (57.53% of $3.45) = $1.46   --- (10)

If we change food cost to 32% from 34.98% then the contribution margin

= $3.45 – (55.82% of $3.45) = $1.52 --- (11)

(Note: - 55.82% is the revised Prime Cost % on reducing food cost to 32%)