Using the income statement and the management goals given below, generate a first-draft budget for the upcoming

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Question:

Using the income statement and the management goals given below, generate a first-draft budget for the upcoming year.

Management Goals:

Total sales growth of 1.7%

Sales mix of 71% food and 29% beverage

Food cost of 32.0% and beverage cost of 20.0%

Maintain all controllable expenses at their current percent of sales

Maintain all fixed costs at their current dollar amount

Income Statement and Budget

	Current Year	Management Goals for Budget	Next Year's Budget
Sales	$	%		$	%
Food	$1,013,600	72.4%	71.0%
Beverage	$386,400	27.6%	29.0%
Total Sales	$1,400,000	100.0%	Growth of 1.7%		100.0%
Cost of Sales
Food Cost	$331,447	32.7%	32.0%
Beverage Cost	$85,394	22.1%	20.0%
Total Cost of Goods Sold	$416,841	29.8%
Gross Profit	$983,159	70.2%
Labor
Salaries and Wages	$403,200	28.8%
Employee Benefits	$96,600	6.9%
Total Labor Cost	$499,800	35.7%
Prime Cost	$916,641	65.5%
Controllable Expenses
Direct Operating Expenses	$70,000	5.0%
Music and Entertainment	$11,200	0.8%
Marketing	$32,200	2.3%
Utilities	$63,000	4.5%
General and Administrative	$37,800	2.7%
Repairs and Maintenance	$7,000	0.5%
Total Controllable Expenses	$221,200	15.8%
Income Before Fixed Costs	$262,159	18.7%
Fixed Costs
Occupancy Costs	$140,000	10.0%
Interest	$65,000	4.6%
Depreciation	$21,000	1.5%
Total Fixed Costs (Occupancy, Interest, Depreciation)	$226,000	16.1%
Profit Before Taxes	$36,159	2.6%

FINAL ANALYSIS:

Management would like to hit a profit before taxes of 4.5% of sales. Has it hit that profit target with the budget guidelines listed? If not, what changes would you recommend to the budget to realize a 4.5% profit?