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Hospitality Management Accounting 9th Edition Martin G Jagels, Catherine E Ralston - Solutions
If sales revenue was $48,840 and variable costs were 43%, what is the dollar contribution margin?LO1
You were asked to cater a buffet for 70 people at $18 per person. Your variable costs average 68%, and fixed costs are $100 per day. Determine your contribution margin and operating income. Should you accept the proposal?LO1
You have decided to allocate $12,000 of indirect costs to your café and bar operations based on square footage used. The café occupies 2,200 square feet and the bar occupies 580 square feet. How much of the $12,000 of indirect costs will be allocated to the café?LO1
Given the following information, determine variable cost per guest, and the total fixed costs, using both the high and low data to confirm your calculations. High guests were 18,000 and the low guests were 12,000 and the high and low labor costs were $25,500 and $18,000, respectively.LO1
Given the following information, determine variable cost per dollar of sales revenue and the total fixed costs, using both the high and low data to confirm your calculations. The high total sales revenue was $28,000 and the low sales revenue was $23,000. The high and low operating costs were
A catering service has been asked to provide a lunch buffet the next day for 40 people at a set price of $10.50 per person; no function has been booked for the next two days. The catering service has fixed costs of $150 a day, or $54,750 per operating year, and it operates with a variable cost of
Assume you have a restaurant operation and the property owner has offered a 5-year fixed lease rental of $42,000 per year or variable lease rental of 10% of your sales revenue. Your current sales revenue in the new year is projected to be $505,000. Find the indifference point (the breakeven point
Assume a restaurant owner is showing a positive operating income in 9 of 12 months of operation and is considering whether to close during 3 months of the off-season. Given the information below, do you recommend he close or stay open the last 3 months?LO1 9 months 3 months Total Sales revenue
You are planning to purchase a range and have to make a choice among the following three models of the same type of equipment:Using the concept of relevant costs over the five-year period, which model would be the best investment?LO1 Model 1 Model 2 Model 3 Cash cost Estimate life $ 5,000 $ 5,500 $
The fixed cost of the banquet department of a hotel is $350 a day. A customer selected a menu for 100 persons that would have a food cost of$6.50 per person, a variable wage cost of $2.75 per person, and other variable costs of $1.25 per person.a. Calculate the total cost per person if this banquet
You have the following annual information about a restaurant complex consisting of three departments:a. Allocate the indirect costs as indicated.b. The owner has an offer from the souvenir store operator who is willing to rent the coffee shop space for $9,600 a year. Advise the owner whether to
You have the following income statements for each of the four quarters of a restaurant operation:The owner is contemplating closing the restaurant in the fourth quarter in order to eliminate the loss and take a three-month vacation. The owner has asked for your help, and after an analysis of the
A company owns three motels in a ski resort area. Although there is some business during the summer months, the company finds it very difficult to staff the three operations during this period and is contemplating closing one of the three motels. The sales revenue and breakdown of costs during this
Two entrepreneurs are contemplating purchasing one of two similar competitive motels and have asked for your advice. Present sales revenue of each motel is $550,000 per year. Jack’s motel has annual variable costs of 55% of sales revenue and fixed costs of $212,500; Jock’s motel has annual
Stella’s Steak House has been operating for the past 10 years, and Stella has to negotiate her lease on the premises for the next 5 years. Her options are to pay a fixed monthly rent of $2,800 or to pay a variable monthly rent of 8% of her sales revenue. Over the next 5 years she anticipates her
A hotel wishes to analyze its electricity cost in its rooms department in terms of fixed and variable elements. Monthly income statements show that during its busiest and slowest months, cost and rooms occupied information is as follows:Use the high–low method to calculate the following:a.
You have the following information from the records of a restaurant:Use the high–low method to calculate total fixed cost and total variable cost for the year.LO1 Sales Revenue January February $ 11,200 Wage Costs $ 5,300 13,000 6,100 March 14,900 6,200 April 19,100 7,000 May 22,000 9,000 June
Complete a regression analysis to determine total annual fixed and variable costs using the sales revenue and wage costs shown in P7.9. Compare regression analysis results with the results obtained in P7.9, and comment about the results between the two different methods used to find total annual
A restaurant has the following 12-month record of sales revenue and wage costs:Adjustments to the base information shown: Included in the July wages is a lump-sum retroactive wage increase of $1,800, which would not normally be part of the July wage cost. Also, in December, the restaurant catered a
Briefly discuss the assumptions and limitations inherent in CVP analysis.LO1
Identify and discuss the various functions shown in a graph of sales levels, and fixed and variable costs.LO1
State the CVP equation used to determine the sales revenue level in dollars and the equation used to determine the sales level in units.LO1
Demonstrate by example how the CVP equations are used to determine breakeven sales revenue in dollars and in units.LO1
Demonstrate by example how the CVP equations are used to determine sales revenue volume in dollars and sales quantity in units.LO1
Explain the term contribution margin and the format of a contribution margin income statement.LO1
Discuss how operating income before tax and net income (after tax) can be used in the CVP equation.LO1
Discuss the use of CVP analysis to solve problems concerning joint fixed costs in a multiple-department organization.LO1
Discuss two of the assumptions built into CVP analysis.LO1
Discuss two of the limitations built into CVP analysis.LO1
Give a brief explanation of how to prepare a breakeven graph or chart to be used in CVP analysis.LO1
If one has used a breakeven graph to determine the breakeven level of sales revenue, how can one arithmetically test that the level selected is correct?LO1
In an ongoing business, why is a graph not necessarily the best technique to use in CVP analysis?LO1
What is the equation for calculating a particular sales revenue level in dollars using CVP analysis?LO1
What is the equation for calculating required sales revenue in units using CVP analysis?LO1
Define the term contribution margin.LO1
If management wants to know the sales revenue level it would have to achieve to make a specific profit, how can the required sales level be calculated?LO1
In studying the feasibility of a new operation, how can CVP analysis be used to determine the volume of sales revenue required to give a desired return on investment?LO1
A restaurant has a food department and a beverage department. Total sales revenue is made up of 80% food and 20% beverages. Food variable costs are 35%, and beverage variable costs are 33%. What is the restaurant’s combined contribution margin?LO1
State the equation for converting an after-tax profit figure to a before-tax profit amount.LO1
A restaurant has sales revenue of $320,000, fixed costs of $108,000, and variable costs of $128,000. What is breakeven sales revenue?LO1
Fixed costs are $137,500 and variable costs are 45%. What is breakeven sales revenue?LO1
Fixed costs are $240,000 and the contribution margin is 48%. What is breakeven sales revenue?LO1
A restaurant has fixed costs of $53,400 for the month of March 0006. The average check is $12.95, with an average variable cost of $7.38. What is breakeven units of sales revenue for the month of March?LO1
A small pub serving only specialty beer has fixed costs of $62,400 per year. The average contribution margin on sales revenue is $2.08. What is the number of units to be sold to reach breakeven?LO1
A restaurant has an average check of $12.75, with an average variable cost of $4.85. Fixed costs are $142,200. Calculate the following:a. What is the unit contribution margin?b. What are breakeven units?c. What is the variable cost percentage?d. What is the contribution as a percentage?e. What is
The owner of a restaurant and bar operation wants a 20% net income after-tax return on his investment of $200,000. The tax rate is 28%. What is the net income before tax and the income tax?LO1
A hospitality operation has sales revenue of $462,000 with variable cost averaging 44%. Fixed costs are $188,000. The owner wants a net income after tax of $50,400 based on a tax rate of 28%.a. Calculate the total additional sales revenue needed to support the desired net income after tax.b.
An operation operates with a variable cost percentage of 72%. The owner wants to increase sales revenue by an amount necessary to provide for an additional operating income of $800 a month, or $9,600 a year. What is the additional increase in sales revenue required?LO1
Assume the following information is provided:Explain how each numerator item in the CVP equation is an individual item that can be calculated on its own to find the necessary sales revenue to cover that item. Calculate each element in the numerator individually item by item and total the individual
A restaurant with an average check of $14 per guest has the following average monthly figures:a. What is breakeven sales revenue?b. If actual sales revenue was $640,000, what would the restaurant’s operating income be?c. If actual sales revenue was $640,000, how many fewer customers per month
A small inn has annual fixed costs of $88,000, variable costs of 68% of sales revenue, and a tax rate of 30%. The owner wants an after-tax net income of $33,600. What sales revenue must be achieved to provide$33,600 net income after tax? Prepare a contribution margin income statement to confirm the
A restaurant is being planned that will require an investment of $150,000 in equipment by the owner. The following shows forecasted variable cost percentages, and identifiable known costs (considered fixed and semifixed costs at start-up).a. What is the breakeven level of sales revenue for the
A cocktail bar is currently doing $582,000 a year in sales revenue. Liquor cost is 38% and other variable costs at this level of sales revenue are 28%.Fixed costs are $150,000.a. What is the annual operating income (before tax)?b. The owner wants to increase the manager’s salary by $12,000 a
A motel has 70 rooms it usually rents out, in the following proportions:The motel has annual fixed costs of $445,000 and variable costs averages $14 per room occupied.a. Calculate the motel’s breakeven level and its occupancy percentage.b. Calculate the occupancy percentage that will provide
A 90-room motel has an average room rate of $65.60. Its fixed costs are$300,000 a year, and its variable costs total $476,000 at an average occupancy of 70%.a. What is the motel’s breakeven occupancy percentage?b. What level of sales revenue is required to provide an operating income(before
The Relax Inn’s rooms department has annual sales revenue of$600,000 and variable costs of $180,000. The inn’s food department has annual sales revenue of $200,000 and variable costs of $160,000.The inn’s fixed costs are $220,000. The total sales revenue of the inn is $800,000 jointly.a.
A restaurant has a cafe and bar operation. The cafe provides 65% of total sales revenue with a 48% variable cost. The bar provides 35% of total sales revenue with a 38% variable cost. Answer the following:a. What is the contribution margin of the cafe?b. What is the contribution margin of the
A motel has a rooms department and a dining room, and total fixed cost of the operation is $335,000. Annual sales revenue and cost figures are as follows:a. What will be the increase in contribution margin if there is a $20,000 increase in sales revenue only in the rooms department?b. What will be
A neighborhood restaurant opens for lunch only and has a menu limited to five meals. The history of each menu item relative to its percentage of total sales revenue (SR%), selling price (SP), and variable costs (VC) is shown in the following table:Total variable cost of beverages averages 55%. The
An owner has $200,000 to invest in a new restaurant. Equipment and furniture are to be purchased for $170,000, and $30,000 will be used for initial working capital. First-year estimates anticipate variable costs as a percentage of sales revenue to be food costs at 35%, variable wage costs at 30%,
A resort hotel has total annual sales revenue of $1,000,000, variable costs of $350,000, and fixed costs of $570,000. The fixed costs include $80,000 a year for land rental lease.a. Calculate the hotel’s breakeven point.b. If the owners had an equity investment in the hotel of $1,200,000, what
A small restaurant reported the following current assets at year’s end: Cash$2,440, credit card receivables $1,402, accounts receivable $440, food inventories$2,680, prepaid insurance $1,200, and prepaid rent $1,500. Current liabilities were $3,426. (a) Complete a common-size vertical analysis of
You are provided with the following information regarding current assets and current liabilities of a restaurant operation for two successive years.Calculate the following for Years 0006 and 0007.a. Working capitalb. Current ratioc. Quick ratio Sales revenue for Year 0007 is $544,800. The
With reference to the information in P4.2, use a common-size vertical analysis to determine the composition of current assets and current liabilities for Years 0006 and 0007. Discuss the results.LO1
A fire occurred in a friend’s restaurant overnight on December 31, 0007, and the friend has asked for your help. Although many accounting records were lost, some were recovered. With the recovered records and information obtained from outside sources, you believe a balance sheet can be
You have the following information taken from the balance sheets for two successive years for a hotel operation.For each year, calculate:a. Total assets to total liabilities ratiob. Total liabilities to total assets ratioc. Total liabilities to total equity ratio Discuss the changes that have taken
In addition to the information given in P4.5, an income statement for the hotel for Year 0007 is available:For Year 0007, calculate the following:a. Gross return on assetsb. Net return on assetsc. Number of times interest is earned; discuss acceptabilityd. Net income to sales revenue ratio; discuss
You have the following information from a restaurant operation:From the information given, calculate the following:a. Working capital for Years 0007 and 0008b. Current ratio for Years 0007 and 0008c. Quick ratio (Acid test ratio) for Years 0007 and 0008d. Credit card receivables as a percentage of
The owners of a cocktail bar have the following annual income statement information:The owners are considering new furnishings for the bar at an estimated cost of $20,000 using their own funds. They anticipate the new furnishings will bring in additional customers, and their sales revenue will
A restaurant has the following statistical information calculated from its financial statements for the past three years:Using this information, answer each of the following questions and explain your answer. A simple yes, no, more, less, or maybe won’t do!a. Are current assets in relation to
A restaurant has the following statistical information calculated from its financial statements for the past three years:Using this information, answer each of the following questions and explain your answer. A simple yes, no, more, less, or maybe won’t do! A comment is required in each case.a.
A Resort Hotel has 75 guest rooms and a small dining room with 40 seats.The hotel recorded the following information for the month of March.■ Room revenue was $91,108.■ A total of 1,798 rooms were occupied.■ A total of 3,417 guests are using the 1,798 rooms occupied.■ Dining room food
Owners of a catering company also own a number of relatively small coffee shops, one of which shows excellent potential to increase its sales revenue.Selected annual operating figures follow:Based on the potential of increasing sales revenue, the owners are seriously considering a 10-year lease on
Define the purpose of internal control.LO1
Briefly describe the two basic requirements for good internal control.LO1
Briefly discuss some of the basic principles of good internal control, such as defining job responsibilities, separating record keeping from control of assets, and dividing responsibilities for related tasks.LO1
Explain how lapping can be used for fraudulent purposes.LO1
List and briefly discuss each of the five control documents used to control purchases.LO1
List and discuss the proper procedures for product storage and inventory control.LO1
Describe how a petty cash fund operates.LO1
Explain briefly how control can be established over cash receipts and cash disbursements.LO1
List the procedures necessary to control payroll disbursements.LO1
Complete a bank reconciliation.LO1
Calculate a standard food or beverage cost from given information.LO1
What are the two basic requirements for an internal control system?LO1
Define collusion, and explain why you think it is difficult to detect.LO1
Why is it necessary to define responsibility for particular jobs?LO1
Explain what separation of record keeping from control of assets means, and why you would use it.LO1
Explain how lapping works.LO1
What does the term division of responsibilities mean?LO1
List the five documents or forms used for control of purchases. Briefly explain the use of any two of these documents.LO1
List and briefly discuss appropriate procedures for control over product storage and explain how perpetual inventory cards can be used in inventory control.LO1
Why should all cash receipts be deposited intact each day in the bank?LO1
Describe how a petty cash fund is established.LO1
In paying invoices by check, how can control be established?LO1
List the special procedures that are necessary for control of payroll and distribution of paychecks.LO1
Explain the reasons why payment of cash wages should be avoided.LO1
The balance of a company’s check register normally will not agree with the bank statement balance prior to reconciliation. Why?LO1
List the steps to reconcile the bank statement balance to the check register balance.LO1
Define the major objective of internal control.LO1
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