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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 DayNov 11, 2019Swinburne University of Technology

Solution

David answered on Nov 30 2019
108 Votes
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...
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