Obtain the income statements for Papa John’s, Inc. for 2014, 2015, 2016, and 2017. The 2015–2017 statements are included in Papa John’s 2017 annual report and Form 10-K, and the 2014 statement is in its 2016 annual report and Form 10-K. (Obtain the 2014 numbers from the 2016 Form 10-K, not the 2014 Form 10-K.)

To obtain the Form 10-Ks, you can use the EDGAR system (see Appendix A at the back of this text for instructions), or they can be found under the “Investors Relations” link on the company’s corporate website, www.papajohns.com.

Required

a. Compute the percentage change for each of the following categories of revenues and expenses for 2014 to 2015 and 2015 to 2016:

Total revenues
Domestic company-owned restaurant expenses
North America commissary and other expenses
International expenses
General and administrative expenses
Depreciation and amortization

Using an Excel spreadsheet will make this task much easier. After you have obtained these averages (you should have two averages for each of the six revenue and expense items), calculate an average of the changes for each item. The answer for the “Depreciation and amortization” item is shown as an example.

Percentage Change
2014–2015 ................................... .9%
2015–2016 ................................. 1.7%
Average of the changes ........... 1.3%

b. Prepare a budgeted income statement, and compare the budgeted data to the actual results for 2017. To calculate budgeted amounts, multiply (1 + Average percentage change) in each revenue and expense item from Requirement b by the dollar amount of the corresponding revenue or expense item from 2016. This will represent the budgeted amount for that item for 2017. Don’t forget to use decimal data and not percentage data. Subtract the actual 2017 results from the budgeted results. Finally, divide the actual versus budgeted difference by the budgeted amount to determine a percentage variance from the budget. The answer for the “Depreciation and amortization” item is shown as an example (dollar amounts are in millions).

Transcribed Image Text:

(1) (2) Average [1+ (1 x 2)] 2-year (3) (5 3) Percentage (4) (5) 2016 2017 (3- 4) Actual Varlance from Budget 2017 Varlance Actual Change Budget Depreciation and amortization $40,987 0.013 $41,520 $43,668 $2,148 0.052 [5.2%]