a) The manager of a Belfast Restaurant has determined that during the last 3 years the...

 

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a) The manager of a Belfast Restaurant has determined that during the last 3 years the sales mix and contribution margin ratio of its offerings are as follows. Percent of total sales Contribution margin ratio Starters Main Dessert Drinks 18% 45% The manager is considering a variety of options to try to improve the profitability of the restaurant. The goal is to generate a target net income of £170,000. The company has fixed costs of £375,000 per year. Sales and production (units) 26% 11% Requirement: i) Calculate the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income. [7 Marks] ii) Discuss the assumptions you have made in arriving at the calculations. [ 3 Marks] Revenue Variable costs b) The following information was produced by Shanghai Technical company (Shanghai): Fixed costs Profit Budget 2,400,000 Budget £ 8,400,000 5,064,000 1,260,000 2,076,000 64% 40% 70% 85% Actual 1,567,500 Actual £ 5,360,850 3,401,475 1,335,000 624.375 Variance (832,500) Variance £ (3,039,150) 1,662,525 (75,000) (1.451,625) The above budget was based with the assumption that the total size of the market for March would be 50 million units. Now, after the above report was produced, more information has become available. The actual size of the market for March was lower than estimated at 42 million units. Requirement: i) Produce a statement that reconciles the budgeted profit to actual profit for March with specific focus on planning and operating variances. [7 Marks ] a) The manager of a Belfast Restaurant has determined that during the last 3 years the sales mix and contribution margin ratio of its offerings are as follows. Percent of total sales Contribution margin ratio Starters Main Dessert Drinks 18% 45% The manager is considering a variety of options to try to improve the profitability of the restaurant. The goal is to generate a target net income of £170,000. The company has fixed costs of £375,000 per year. Sales and production (units) 26% 11% Requirement: i) Calculate the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income. [7 Marks] ii) Discuss the assumptions you have made in arriving at the calculations. [ 3 Marks] Revenue Variable costs b) The following information was produced by Shanghai Technical company (Shanghai): Fixed costs Profit Budget 2,400,000 Budget £ 8,400,000 5,064,000 1,260,000 2,076,000 64% 40% 70% 85% Actual 1,567,500 Actual £ 5,360,850 3,401,475 1,335,000 624.375 Variance (832,500) Variance £ (3,039,150) 1,662,525 (75,000) (1.451,625) The above budget was based with the assumption that the total size of the market for March would be 50 million units. Now, after the above report was produced, more information has become available. The actual size of the market for March was lower than estimated at 42 million units. Requirement: i) Produce a statement that reconciles the budgeted profit to actual profit for March with specific focus on planning and operating variances. [7 Marks ]