Question

Problems Problem 1 The total ingredient cost in a recipe is $4.73; the manager desires a 37.5-percent food cost. What is the base selling price of the item using the ingredients mark-up method? Should the manager price the item in the above example at the base selling price you calculated? Why or why not? Problem 2 The chef has precosted the recipe for an entrée and a sauce, which is one item on the menu: the food cost is $6.34. A prime ingredient multiplier of 3.72 has been established. What is the base selling price when the prime ingredient mark-up method is used? Problem 3 The Prairie Town Grill does not serve alcoholic beverages. Its operating budget reveals the following Revenue $1,375,000 • Food cost $585.000 • Non-food costs $710,000 Profit $80,000 • Number of guests 161,580 • Guest check average $8.51 • Contribution margin $790,000 (revenue - food costs) Using the above information, calculate the base selling price of a menu item with a total ingredient cost of $4.85 using: a. The contribution margin pricing method. b. The ratio pricing method. c. The simple prime costs method (note: the non-food costs include $426,250 in labor costs). Problem 4 The manager uses the mark-up with accompaniment cost method to establish a base selling price. What is that price when the entrée cost is $2.12, the plate cost is $1.70, and the mark-up multiplier is 2.1? Problem 5 The manager of the University Square Bistro has the following operating data available: Revenue $1,187,000 Food cost $403,580 (includes entrée costs of $274,434) Labor cost $367,970 Other non-food costs $316,550 (excludes labor) Desired profit $98,900 Number of guests 107,900

Answer 1

Answer-1:

Multiplier = 1 / Desired food cost % = 1 / 37.5% = 2.67

Base selling price = Ingredient cost × Multiplier = $4.73 × 2.67 = $12.61

Answer-2:

Multiplier = 1 / Desired food cost % = 1 / 37.5% = 2.67

Base selling price = Prime Ingredient cost × Multiplier = $6.34 × 3.72 = $23.58