The trainees need to have some understanding of aspects of marginal costing. The UM Ltd Case...

  

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The trainees need to have some understanding of aspects of marginal costing. The UM Ltd Case includes a simple 'break-even' case study as follows. UM Ltd has a works restaurant which provides snacks and cooked meals during 6 hours of each working day, 6 days a week for 48 weeks of the year. The restaurant area can accommodate up to 25 customers at any one time and it is considered, on average, that each diner would spend 1 hour in the restaurant. The facility is operated as a profit centre which is expected to generate a small profi for the organisation. It has the following annual fixed costs. Unified Models Restaurant rent and local taxes Chef and cooks Kitchen staff Depreciation of equipment Heating, Light and Cleaning Repairs and maintenance Licences etc Loan Interest on borrowings £ 25,000 150,000 50,000 10,000 10,000 5.000 2,000 4,000 256,000 A typical cooked meal is sold for £8 and the variable costs of the ingredients and power etc for this meal are £2.00. You are required to: • Calculate how many meals are needed to break even and to briefly state your opinion about the financial viability of the restaurant in terms of its ability to make a profit for UM Ltd. • Produce a simple pie chart using the annual fixed cost information, above. Briefly describe the main message portrayed by your chart. The trainees need to have some understanding of aspects of marginal costing. The UM Ltd Case includes a simple 'break-even' case study as follows. UM Ltd has a works restaurant which provides snacks and cooked meals during 6 hours of each working day, 6 days a week for 48 weeks of the year. The restaurant area can accommodate up to 25 customers at any one time and it is considered, on average, that each diner would spend 1 hour in the restaurant. The facility is operated as a profit centre which is expected to generate a small profi for the organisation. It has the following annual fixed costs. Unified Models Restaurant rent and local taxes Chef and cooks Kitchen staff Depreciation of equipment Heating, Light and Cleaning Repairs and maintenance Licences etc Loan Interest on borrowings £ 25,000 150,000 50,000 10,000 10,000 5.000 2,000 4,000 256,000 A typical cooked meal is sold for £8 and the variable costs of the ingredients and power etc for this meal are £2.00. You are required to: • Calculate how many meals are needed to break even and to briefly state your opinion about the financial viability of the restaurant in terms of its ability to make a profit for UM Ltd. • Produce a simple pie chart using the annual fixed cost information, above. Briefly describe the main message portrayed by your chart.

Answer rating: 100% (QA)

Answer 1 In order to calculate the breakeven point for the restaurant we need to calculate the total fixed costs and total variable costs The total fi... View the full answer