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Practice Problem #2: Desired Net Income: Owners want a 23% after tax return on a $250,000 investment of new FF&E • Income Tax Rate: 37% of operating income before tax • Depreciation of 10% of the book value of the $250,000 of FF&E • Annual Costs: Rent=$50,000, Insurance/Licenses=$6,000, Utilities/Maintenance=$7,500, Administrative=$15,500, • Variable Costs-cos Food and Beverage 41% (Too High!), Labor=31%, Other=6% Management Salary=$40,000 1 Identify Projected Costs Desired Net Income after Tax Income Tax: Known Annual Costs ($5): Depreciation Rent Insurance License Utilities/Maintenance Administrative Management Salary Total Known Annual Costs Variable Costs (% of Sales) COS - Food and Beverage Labor Other Operating Variable Costs

Practice Problem #2: Desired Net Income: Owners want a 23% after tax return on a $250,000 investment of new FF&E • Income Tax Rate: 37% of operating income before tax • Depreciation of 10% of the book value of the $250,000 of FF&E • Annual Costs: Rent=$50,000, Insurance/Licenses=$6,000, Utilities/Maintenance=$7,500, Administrative=$15,500, • Variable Costs-cos Food and Beverage 41% (Too High!), Labor=31%, Other=6% Management Salary=$40,000 1 Identify Projected Costs Desired Net Income after Tax Income Tax: Known Annual Costs ($5): Depreciation Rent Insurance License Utilities/Maintenance Administrative Management Salary Total Known Annual Costs Variable Costs (% of Sales) COS - Food and Beverage Labor Other Operating Variable Costs

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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AutoSave Bottoms Up Pricing Worksheet Compatibility Mode – Saved to my Mac OFF W Home Insert Draw Design Layout References Mailings Review View Grammarly Tell me Share Comments A A abc Аa v AaBbCcDdE AaBb Arial 11 AaBbCcDdEe AaBbCcD AaBbCcDdEe AaBbCcDdEe AaBbCcDdE€ AaBbCcDdEe AaBbCcDdEe Subtle Emph... Styles Pane Dictate Оpen Grammarly Paste A No Spacing Heading 1 Heading 2 Title Subtitle Emphasis Intense Emp.. I U v ab x, Normal Managerial Accounting - Bottoms Up Approach to Pricing Page 4 #2 Prepare Projected Income Statement (Incomplete) $$ Sales Revenue COS - Food and Beverage Unknown 100% Labor Other Operating VC Total Variable Cost % Depreciation Rent Insurance /License Utilities/Maintenance Administrative Management Salary Income Tax Net Income Total Total Costs as a % Sales Rev 100% # 3 Prepare Condensed Projected Income Statement Sales Revenue Variable Costs (Food, Bev, Labor, Other) Contribution Margin Total Operating Costs Operating Income (BT) Income Tax Net Income # 4 Solve for Average Check Projections by Meal Period to support projected Sales Revenue Knowing the forecasted sales revenue allows businesses to accurately forecast overall average check and average check by meal period. This is critical information needed for the budgeting process and selecting strategic pricing strategies. Average Check by Meal Period = (Revenue generated from meal period / Seats x T/O x number days open) Seat Turnover = # guests or covers / # seats in operation or available_(Can be calculated by Meal Period or Day) Managerial Accounting - Bottoms Up Approach to Pricing Page 5 Practice Problem #3: Page 4 of 8 1075 words English (United States) EO Focus + 120% B
Transcribed Image Text:AutoSave Bottoms Up Pricing Worksheet Compatibility Mode – Saved to my Mac OFF W Home Insert Draw Design Layout References Mailings Review View Grammarly Tell me Share Comments A A abc Аa v AaBbCcDdE AaBb Arial 11 AaBbCcDdEe AaBbCcD AaBbCcDdEe AaBbCcDdEe AaBbCcDdE€ AaBbCcDdEe AaBbCcDdEe Subtle Emph... Styles Pane Dictate Оpen Grammarly Paste A No Spacing Heading 1 Heading 2 Title Subtitle Emphasis Intense Emp.. I U v ab x, Normal Managerial Accounting - Bottoms Up Approach to Pricing Page 4 #2 Prepare Projected Income Statement (Incomplete) $$ Sales Revenue COS - Food and Beverage Unknown 100% Labor Other Operating VC Total Variable Cost % Depreciation Rent Insurance /License Utilities/Maintenance Administrative Management Salary Income Tax Net Income Total Total Costs as a % Sales Rev 100% # 3 Prepare Condensed Projected Income Statement Sales Revenue Variable Costs (Food, Bev, Labor, Other) Contribution Margin Total Operating Costs Operating Income (BT) Income Tax Net Income # 4 Solve for Average Check Projections by Meal Period to support projected Sales Revenue Knowing the forecasted sales revenue allows businesses to accurately forecast overall average check and average check by meal period. This is critical information needed for the budgeting process and selecting strategic pricing strategies. Average Check by Meal Period = (Revenue generated from meal period / Seats x T/O x number days open) Seat Turnover = # guests or covers / # seats in operation or available_(Can be calculated by Meal Period or Day) Managerial Accounting - Bottoms Up Approach to Pricing Page 5 Practice Problem #3: Page 4 of 8 1075 words English (United States) EO Focus + 120% B
AutoSave Bottoms Up Pricing Worksheet Compatibility Mode – Saved to my Mac OFF W Home Insert Draw Design Layout References Mailings Review View Grammarly Tell me Share Comments A A abc Аa v AaBbCcDdE AaBb Arial 11 AaBbCcDdEe AaBbCcD AaBbCcDdEe AaBbCcDdEe AaBbCcDdE€ AaBbCcDdEe AaBbCcDdEe Subtle Emph... Styles Pane Dictate Оpen Grammarly Paste I U v ab x, A Normal No Spacing Heading 1 Heading 2 Title Subtitle Emphasis Intense Emp.. Practice Problem #2: Desired Net Income: Owners want a 23% after tax return on a $250,000 investment of new FF&E Income Tax Rate: 37% of operating income before tax Depreciation of 10% of the book value of the $250,000 Of FF&E Annual Costs: Rent=$50,000, Insurance/Licenses=$6,000, Utilities/Maintenance=$7,500, Administrative=$15,500, Management Salary=$40,000 Variable Costs=COS Food and Beverage 41% (Too High!), Labor=31%, Other=6% #1 Identify Projected Costs Desired Net Income after Tax: Income Tax: Known Annual Costs ($$): Depreciation Rent Insurance /License Utilities/Maintenance Administrative Management Salary Total Known Annual Costs Costs (% of Sales) Food and Beverage Variab COS Labor Other Operating Variable Costs Managerial Accounting - Bottoms Up Approach to Pricing Page 4 #2 Prepare Projected Income Statement (Incomplete) $$ Sales Revenue Unknown 100% COS - Food and Beverage Labor Other Operating VC Total Variable Cost % Depreciation Pent Page 3 of 8 1075 words English (United States) EO Focus + 120% B
Transcribed Image Text:AutoSave Bottoms Up Pricing Worksheet Compatibility Mode – Saved to my Mac OFF W Home Insert Draw Design Layout References Mailings Review View Grammarly Tell me Share Comments A A abc Аa v AaBbCcDdE AaBb Arial 11 AaBbCcDdEe AaBbCcD AaBbCcDdEe AaBbCcDdEe AaBbCcDdE€ AaBbCcDdEe AaBbCcDdEe Subtle Emph... Styles Pane Dictate Оpen Grammarly Paste I U v ab x, A Normal No Spacing Heading 1 Heading 2 Title Subtitle Emphasis Intense Emp.. Practice Problem #2: Desired Net Income: Owners want a 23% after tax return on a $250,000 investment of new FF&E Income Tax Rate: 37% of operating income before tax Depreciation of 10% of the book value of the $250,000 Of FF&E Annual Costs: Rent=$50,000, Insurance/Licenses=$6,000, Utilities/Maintenance=$7,500, Administrative=$15,500, Management Salary=$40,000 Variable Costs=COS Food and Beverage 41% (Too High!), Labor=31%, Other=6% #1 Identify Projected Costs Desired Net Income after Tax: Income Tax: Known Annual Costs ($$): Depreciation Rent Insurance /License Utilities/Maintenance Administrative Management Salary Total Known Annual Costs Costs (% of Sales) Food and Beverage Variab COS Labor Other Operating Variable Costs Managerial Accounting - Bottoms Up Approach to Pricing Page 4 #2 Prepare Projected Income Statement (Incomplete) $$ Sales Revenue Unknown 100% COS - Food and Beverage Labor Other Operating VC Total Variable Cost % Depreciation Pent Page 3 of 8 1075 words English (United States) EO Focus + 120% B
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