Hospitality Industry Break-Even Analysis

This assignment involves analyzing the financial requirements of a food restaurant and hotel, focusing on cost sheets, selling prices, total costs, and calculating the break-even point to determine overall profit. It emphasizes the importance of effective financing in hospitality operations.

Finance
in
The Hospitality
Industry

Table of Contents
INTRODUCTION...........................................................................................................................1
A. PREPARING A COST SHEET..................................................................................................1
1. To prepare a cost for the recipe four portion of flambéed chicken as follows:.......................1
2. Calculation the cost per portion..............................................................................................1
3. Calculate the quantity required for 70 portions.......................................................................1
4. Selling price per portion to produce a 85% gross profit.........................................................2
B. COSTING OF TEN NIGHT PACKAGE HOLIDAY................................................................2
1. Total cost per package deal.....................................................................................................2
2. Cost per person based on selling all seats...............................................................................2
3. Selling price per seat as per the 35%......................................................................................3
4. Cost per seat............................................................................................................................3
5. Calculation of profit................................................................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
Finance is a life blood of every organisation. Present report describe the effective
management of finance by making cost sheet of a restaurant. It also explain the process by which
break even point and gross sales or selling price is calculated in the report (Legrand, Sloan and
Chen, 2016).
A. PREPARING A COST SHEET
1. To prepare a cost for the recipe four portion of flambéed chicken as follows:
Quantity Item Cost Total (€)
4 Chicken Breasts 1.50 each €6
15g (0.015 kg) Plain flour 0.66 per kg €0.0099
30ml (0.03 litre) Olive oil 3.78 per litre €0.1134
100g(0.1 kg) Shallots 3.49 per kg €0.349
60ml (0.60 litre) Brandy 13.07 per litre €7.842
300ml (0.3 litre) Chicken Stock 1.67 per litre €0.501
600g (0.06 kg) Asparagus spears 5.83 per kg €0.3498
50ml (0.05 litre) Crème Fraiche 3.60 per litre €0.18
2. Calculation the cost per portion
To calculate the cost portion, formula are as follows:
Food cost portion= Total Cost of Ingredients/ Menu Price (Walker, 2016)
Item Cost Total Cost Cost Portion
Chicken Breasts 1.50 each €6 €6/1.50= €4
Plain flour 0.66 per kg €0.0099 €0.0099/0.66 =€0.015
Olive oil 3.78 per litre €0.1134 €0.1134/3.78=€ 0.03
Shallots 3.49 per kg €0.349 €0.349/3.49 =€0.1
Brandy 13.07 per litre €7.842 €7.842/13.07=€0.6
Chicken Stock 1.67 per litre €0.501 €0.501/1.67=€0.3
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Asparagus spears 5.83 per kg €0.3498 €0.3498/5.83=€0.06
Crème Fraiche 5.83 per kg €0.18 €0.18/5.83 =€0.030
3. Calculate the quantity required for 70 portions
Item Quantity Number of quantity
per portion
Total
Chicken Breasts 4 70 70
Plain flour 15g 70 262.5
Olive oil 30ml 70 525
Shallots 100g 70 1750
Brandy 60ml 70 1050
Chicken stock 300ml 70 5250
Asparagus spears 600g 70 10500
Crème fraiche 50ml 70 875
4. Selling price per portion to produce a 85% gross profit
Cost portion Gross profit % value Actual cost
€4 85% 3.4 €7.4
€0.015 85% 0.012 €0.027
€ 0.03 85% 0.025 €0.055
€0.1 85% 0.085 €0.185
€0.6 85% 0.51 €1.11
€0.3 85% 0.255 €0.555
€0.06 85% 0.051 €0.111
€0.06 85% 0.051 €0.111
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B. COSTING OF TEN NIGHT PACKAGE HOLIDAY
1. Total cost per package deal
Total cost per package deal can be calculated as per the formula:
Total cost per package deal= Total fixed cost + Total variable cost (Jones, Jones, Hillier, Hillier,
Comfort and Comfort, 2016)
Particulars Cost Total cost (€)
Return cost of airline 7120 7120
Cost of airport taxes 34*48 1680
Total cost of canal 1150* 24 27600
Total cost of coach 8*48 384
Total 36784
2. Cost per person based on selling all seats
Total cost= € 36784
Total number of seat= 48
Cost per person= 36784/ 48= €766.33
Particulars Cost Total cost (€) Cost per person
Return cost of airline 7120 7120 7120/48= € 148.33
Cost of airport taxes 34*48 1680 1680/48= €35
Total cost of canal 1150* 24 27600 27600/48= €575
Total cost of coach 8*48 384 384/48= €8
Total €36784 36784/48= €766.33
3. Selling price per seat as per the 35%
Total Selling price= Cost per person of 35%
= €766.33* 35%= €11.55
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Total selling price= 35+ 11.55= €46.55
4. Cost per seat
Break even point= Total fixed cost/ (sales-variable cost) (Boella and Goss-Turner, 2013)
36= 36784/ (46.55- v)
1675.8- 36v= 36784
36v= 36784-1675.8
36v= 35108.2
v= 35108.3/36
v= €975.22
5. Calculation of profit
Sales= 48* €46.55= €223.44
= 48* €975.22= €46810.56
CONCLUSION
As per the above report, it has been calculated that effective financing is essential for
every organisation. The report examined the finance requirement of food restaurant and hotel. In
this, cost sheet are maintained with the help of selling price, total cost. At last, by calculating the
break even point, hotel can calculate its total profit in their operations (Bharwani and Jauhari,
2013).
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REFERENCES
Bharwani, S. and Jauhari, V., 2013. An exploratory study of competencies required to co-create
memorable customer experiences in the hospitality industry. International Journal of
Contemporary Hospitality Management. 25(6). pp.823-843
Boella, M. and Goss-Turner, S., 2013. Human resource management in the hospitality industry:
A guide to best practice. Routledge.
Jones, P., Jones, P., Hillier, D., Hillier, D., Comfort, D. and Comfort, D., 2016. Sustainability in
the hospitality industry: some personal reflections on corporate challenges and
research agendas. International Journal of Contemporary Hospitality Management.
28(1). pp.36-67.
Legrand, W., Sloan, P. and Chen, J. S., 2016. Sustainability in the hospitality industry:
Principles of sustainable operations. Routledge.
Walker, J. R., 2016. Introduction to hospitality. Pearson Higher Ed.
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