Chapter 10, Question 1

Stella owns a breakfast and lunch restaurant. She has compiled her sales and cost data from last year, and she wants to develop a budget for this year. Using her sales and expense history from last year, help Stella create her budget for next year.

Based on her knowledge of her business and expenses, she has projected the following increases for this year:

[tex]\[
\begin{tabular}{|c|c|}
\hline
\textbf{Projected Increases} & \textbf{Percentage} \\
\hline
Customers served & 5\% \\
\hline
Average check per guest & 3\% \\
\hline
Cost of food & 6\% \\
\hline
Cost of labor & 8\% \\
\hline
Other expenses & 3\% \\
\hline
\end{tabular}
\][/tex]

Using this information, Stella compiled her budget:

[tex]\[
\begin{tabular}{|l|c|c|}
\hline
\textbf{} & \textbf{Last Year} & \textbf{Budget for This Year} \\
\hline
Customers served & 132,400 & 139,020 \\
\hline
Average check per guest & \$13.25 & \$13.65 \\
\hline
\end{tabular}
\][/tex]

[tex]\[
\begin{tabular}{|l|c|c|c|c|}
\hline
\textbf{} & \textbf{Last Year Income Statement} & \textbf{Last Year \%} & \textbf{Proposed Budget for This Year} & \textbf{This Year's Budget \%} \\
\hline
Revenue & \$1,754,300.00 & 100\% & & \\
\hline
Cost of food & \$610,000.00 & 34.8\% & & \\
\hline
Cost of labor & \$488,000.00 & 27.8\% & & \\
\hline
Other expenses & \$245,760.00 & 14.0\% & & \\
\hline
Total expenses & \$1,343,760.00 & 76.6\% & & \\
\hline
Profit & \$410,540.00 & 23.4\% & & \\
\hline
\end{tabular}
\][/tex]

Calculations:

1. Budgeted customers served:
[tex]\[ \text{Last year customers served} + (\text{last year} \times \text{increase\%}) = \text{Budgeted customers served} \][/tex]

2. Budgeted average check for this year:
[tex]\[ \text{Average check last year} + (\text{selling price last year} \times \text{increase\%}) = \text{Budgeted average check for this year} \][/tex]

3. This year's revenue budget:
[tex]\[ \text{Budget customers served} \times \text{Budget selling price} = \text{This year's revenue budget} \][/tex]

4. Cost of food:
[tex]\[ \text{Last year food cost} + (\text{last year food cost} \times \text{increase\%}) = \text{Cost of food} \][/tex]

5. Cost of labor:
[tex]\[ \text{Cost of labor last year} + (\text{cost of labor last year} \times \text{increase\%}) = \text{Cost of labor} \][/tex]

6. Other expenses:
[tex]\[ \text{Last year expenses} + (\text{last year} \times \text{increase\%}) = \text{Other expenses} \][/tex]

7. Total expenses:
[tex]\[ \text{Food cost} + \text{Labor cost} + \text{Other costs} = \text{Total expenses} \][/tex]

8. Profit:
[tex]\[ \text{Revenue} - \text{Total expenses} = \text{Profit} \][/tex]

9. Percentage calculations:
[tex]\[ \frac{\text{Cost, Expense, or Profit}}{\text{Revenue}} = \text{Last Year \%} \][/tex]
[tex]\[ \frac{\text{Cost, Expense, or Profit}}{\text{Revenue}} = \text{This Year's Budget \%} \][/tex]

Remember: Round your answers to two decimal places.