Question

In: Accounting

10. The following figures are from the accounting records of the Red Fox Inn, the restaurant...

10. The following figures are from the accounting records of the Red Fox Inn, the restaurant identified in Question 9:
Opening Inventory $7,414.80
Closing Inventory $6,327.35
Food Purchases $17,642.80
Transfers: Beverage to Food $443.00
Transfers Food to Beverage $226.00
Employees' Meals $837.00
a. Calculate cost of food sold for the month of March.
Cost of Food Sold
b. Using the information provided in Question 9, calculate each of the following:
Actual Cost %
Standard Cost %
Potential Savings $

Potential Savings as a % of Sales

9. The owner of the Red Fox Inn has developed a new menu for use in her establishment. Each menu item represents a complete meal. She has determined standard cost for each item and has kept careful records of sales for the month of March. The data are as follows:
Menu Item Number Sold Standard Portion Cost Total Cost
A 310 $5.50 $1,705.00
B 270 $7.80 $2,106.00
C 540 $3.80 $2,052.00
D 425 $5.25 $2,231.25
E 175 $8.70 $1,522.50
F 340 $6.50 $2,210.00
G 510 $5.70 $2,907.00
H 480 $4.20 $2,016.00
Total Standard Cost $16,749.75
Total Revenue $50,028.50
Total Standard Cost % 33.48%

Solutions

Expert Solution

(a.) Statement of cost of food sold (fig. in $)

Food purchases 17,642.80

Add: Opening Inventory 7,414.80

Transfers from beverage (Beverage to food) 443.00

Less: Closing Inventory 6327.35

Transfers to beverage (Food to beverage) 226.00

Employees' Meals 837.00

TOTAL 18110.25

Therefore, cost of food sold for the month is $ 18,110.25.

Transfers from beverages is added to cost while transfers to beverages is reduced from the cost.

Since the food stock utilised for employees' meals is not part of sales hence that portion of food will not be considered for calculating the cost of food sold.

(b.) Actual cost %

Actual cost is the cost actually incurred as we have calculated from the acounting records in the part (a.), i.e., $ 18,110.25.

Therefore, Actual cost % = Actual cost incurred/Revenue = 18,110.25/50028.50 = 36.2% (Revenue = $ 50,028.50)

  Standard cost %

Standard cost is the estimated or the budgeted cost which is calculated before the actual cost is incurred.

As given in Q9, Standard cost = $ 16,749.75 and Standard cost % = Standard cost/ Revenue = 16749.75/50028.50 = 33.48%

Potential savings

Potential savings = Revenue - Actual cost = 50,028.50 - 18,110.25 = 31,918.25

When we have the figure of actual cost, potential savings must be calculated by deducting actual cost from the total revenue. Therefore, Potential savings are $ 31,918.25.

ekkarill92 answered 1 year ago
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