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# Assessment 1 Part 2 – CVP Analysis You are assisting management consider different cost and pricing strategies. Consider the following data and report to management your findings. 1. The cocktail bar...

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Assessment 1 Part 2 – CVP Analysis
You are assisting management consider different cost and pricing strategies. Consider
the following data and report to management your findings.
1. The cocktail bar in the Le Cordon Bleu hotel currently has sales revenue of
\$650,000.00 per year. Beverage costs amount to 40% and other variable costs at
this level of revenue amount to 10%. Fixed costs are \$170,000pa.
You are required to show all relevant formula and calculations using a professional
layout as explained during class tutorial sessions. Use Excel and use whole
numbers. Percentages where shown should be 1 decimal place ie xx.x%.
Please read the questions and information carefully.
1.1 What is the annual net profit (before tax)? (4)
1.2 The owner wants to increase the manager’s salary by \$12,000 per year.
What is the new sales revenue needed to provide this additional salary and
maintain the current level of net profit? Show the equation you used to arrive at this
answer. (2)
(Any added sales revenue will come from increasing seat turnover by
improving/increasing the efficiency of customer service).
1.3 Instead of increasing sales revenue by increasing seat turnover and customer
service, the owner decides to increase menu prices by 5%.
The owner believes the price increase can be made without losing any customers
and without increasing the cost of sales or other variable costs. The original variable
cost dollar values and the manager’s salary increase still apply. Hint calculate the
new SR based on the original Sale Revenue.
Show the new VC%’s.
What will the bar’s net profit (before tax) be? (4)
Hospitality Financial Management (HFM)
2 © Le Cordon Bleu, Ryde
2. The restaurant in the Le Cordon Bleu hotel currently has a cover sale price of \$65
with a variable unit cost of \$21, Fixed costs are \$80,000.
The owner wants to increase the manager’s salary by \$12,000.00 per year.
2.1) Calculate the total number of covers to BE and meet the managers salary
increase. (3)
2.2) The owner has also been advised by his supplier, the cost of raw materials is
about to increase by 2.6%.
Calculate the number of covers for the increased salary and increased costs.
Show the new VCu, CMu in \$xx.cc (3)
2.3) How many more covers are required to meet the increased Variable Cost
increase? (2)
3) Using this data, create a table and then use the graphical method of analysis to
display:
 Units sold in 1000 increments,
 Total Sales Revenue,
 Fixed Costs,
 Variable Costs,
 Total Costs

Answered Same Day Nov 11, 2019 Swinburne University of Technology

## Solution

David answered on Nov 30 2019
Answer 1.1:
Sales revenue
650000
100.00%
Variable costs - Beverages
260000
40.00%
Other variable costs
65000
10.00%
Total variable costs
325000
50.00%
Contribution margin
325000

Fixed cost
170000

Profit before tax
155000

Answer 1.2:
Sales revenue to have the profit of \$155000
Expected sales =
(Fixed cost + target profit) / CM ratio
=
(170000+12000)/(40%+10%)
=
364000
Answer 1.3:

Old

New

Sales revenue
650000
100.00%
682500
100.00%
Variable costs - Beverages
260000
40.00%
260000
38.10%
Other variable costs
65000
10.00%
65000
9.52%
Total variable costs
325000
50.00%
325000
47.62%
Contribution margin
325000

357500

Fixed cost
170000

182000

Profit before...
SOLUTION.PDF