Hospitality financial Management PDF

HOSPITALITY FINANCIAL MANAGEMENT
Question 1
Answer 1
Part A
Current Sales Revenue : $650,000
Cost of Beverage = 40% of 650,000= $260,000.
Other Variable Cost = 10% of 650,000= $65,000
Total Variable Cost= $260,000+ $65,000= $325,000
Contribution= Current Sales- Total Variable Cost
=$650,000-$325,000= $325,000
Fixed Cost=$170,000
Profit Before Tax=Contribution-Fixed Cost= $325,000-$170,000= $155,000
PART B
Increase in Fixed Cost= $12000
New Fixed Cost= $170,000 + $12,000= $182,000
Profit Before Tax required= $155,000
Contribution= New Fixed Cost+ Profit Before Tax= $182,000 + $155,000= $337,000
Variable Cost= 50% of Current sales or 100% of Contribution
New Current Sales= Variable Cost + Contribution= $337,000+ $337,000= $ 674,000
PART C
Sub Part 1
% Increase in Menu Price = 5%
Existing Revenue= $650,000
New Revenue= $650,000*1.05= $682,500
Sub Part 2
Total Variable Cost= $ 325,000 (Computed in Part A)
New Revenue= $ 682,500
Variable Cost % of Revenue = Total Variable Cost/ New Revenue= 325000/682500 = 47.62%
Beverage Cost= $ 260,000
New Revenue= $ 682,500
Variable Cost % of Revenue = Variable Cost/ New Revenue= 260000/682500 = 38.09%