Question

Following information provided for the year ended on 31 December 2019 for STEPHANS CATERING INC. (SCI) a well-known catering business in K-W area. You are required to prepare Income Statement and various calculation as directed.
1
Calculate the Sales for the Year if sales are an average $93,333.34 per month (round to the nearest dollar)
2
Calculate the $ Cost of Food Sold (COFS) based on the following information:
➢ Opening Inventory $75000
➢ Purchases $320,000
➢ Closing inventory $ 60,000
3
Calculate the Food Cost %
4
Calculate the Gross Profit Margin in $dollars and a % percentage
5
Calculate the Salary and Wage expense if it represents 30% of sales
6
Benefits are 14% of salary and wages costs
7
Calculate the annual Supply costs (yearly) if Stephan uses $1,500 of supplies per month
8
Calculate the annual Rent (yearly) expense if rent is $10,000 per month
9
Calculate the depreciation @ 20% on vehicles and book value of vehicles are $40,000
10
Calculate the depreciation @ 10% on Furniture and its book value is $36000
11
Calculate the annual Advertising costs(yearly) if Stephan spends $6,000 per month
12
Calculate China and linen rentals $3,750 monthly
13
Calculate the annual Utility costs (yearly) if Stephan spends $2,500 per month
14
Calculate interest cost @5% on VMO Bank loan $120,000
15
Calculate Total Expenses in both Dollars and a % of Sales
16
Calculate the total fixed cost and variable cost in $ and in % as total cost (consider payroll cost as fixed cost)
17
Calculate overhead cost % and $ value
18
Calculate controllable costs and Occupancy costs
19
Calculate the Net Income Before Taxes in both Dollars and a % of Sales
20
Calculate the break-even point in $dollars
21
Calculate contribution margin (CM) ratio and contribution margin (CM) $
22
Calculate break even sales value if company wants to have target profit of $120,000
23
Calculate breakeven sales value if food cost value increased to 35%, all other things remain constant

Answer 1

STEPHANS CATERING INC
Income Statement
for the year ended on 31 December 2019
Particulars	Amount $	Amount $	% of Sales
Sales		1,120,000
COGS :
Opening Inventory	75000
Purchases	320,000
Less - Closing inventory	60,000	335,000	29.91%
Gross Profit		785,000	70.09%
Expenses :
Salary & Wages	336,000		30%
Benefits	47,040
Supply	18,000
Annual Rent	120,000
Depreciation on Vehicle	8,000
Depreciation on Furniture	3,600
Advertisement Cost	72,000
China & Linen Rental	45,000
Utility	30,000
Interest	6,000
Total Expenses		685,640	61.22%
Net Profit before Tax		99,360	8.87%

Fixed Cost & Variable Cost

Particulars	Amount $	% of Total Cost
(A) Fixed Cost :
Salary & Wages	336,000
Benefits	47,040
Annual Rent	120,000
Depreciation on Vehicle	8,000
Depreciation on Furniture	3,600
Advertisement Cost	72,000
China & Linen Rental	45,000
Interest	6,000
Supply	18,000
Utility	30,000
Total Fixed Cost	685,640	67.18%
(B) Variable Cost :
COGS	335,000	32.82%
Total Cost (A+B)	1,020,640	100%

Overhead Cost

Particulars	Amount $	% of Sales
Overhead Cost :
Salary & Wages	336,000
Benefits	47,040
Annual Rent	120,000
Depreciation on Vehicle	8,000
Depreciation on Furniture	3,600
Advertisement Cost	72,000
China & Linen Rental	45,000
Interest	6,000
Supply	18,000
Utility	30,000
Total Overhead Cost	685,640	61.22%

Occupancy Cost & Controable Cost

Occupancy Cost :
Annual Rent	120,000
Utility	30,000
Total Occupancy Cost	$150,000
Controlable Cost :
Salary & Wages	336,000
Benefits	47,040
Supply	18,000
Advertisement Cost	72,000
Total Controlable Cost	$473,040

Calculation of Contribution Margin

Sales	1,120,000
Less - Variable Cost	335,000
Contribution Margin	785,000
Less - Fixed Cost	685,640
Net Profit	99,360

Contribution Margin

$785,000

CM Ratio = CM/ Sales *100 = (785,000 / 1,120,000) *100 = 70.09%

Break Even Point = Fixed Cost / CM Ratio

= 685,640 / 70.09% = $978,228

Break even sales value if company wants to have target profit of $120,000

= (Fixed cost + Target Profit) / CM Ratio

= (685,640 + 120,000) / 70.09% = 805,640 / 70.09% = $1,149,436

Calculate breakeven sales value if food cost value increased to 35%, all other things remain constant

Sales	1,120,000
Less - Variable Cost	452,250
Contribution Margin	667,750
Less - Fixed Cost	685,640
Net Loss	17,890

New CM Ratio = (Contribution Margin / Sales) *100 = (667,750 / 1,120,000) * 100 = 59.62%

BEP = Fixed Cost / CM Ratio = 685,640 / 59.62% = $1,150,016.77