Question

9. Lucir manages a German restaurant in a large western city. The restaurant's owner wants to know how well Lucir did this year at generating sales, controlling costs, and providing a profit. The owner promised Lucir that he would give her a raise if she increased return on sales (profit margin) by at least 1 percent. Complete Lucir's P&L. Should Lucir receive a raise?

Answer 1

	Last year ($)	%	Current Year ($)	%
SALES
Food	2,647,415	84.16	2,675,889	73.48
Beverage	498,119	15.84	965,660	26.52
Total Sales	3,145,534	100.00	3,641,549	100.00
COST OF SALES
Food	855,104	27.18	1,074,420	29.50
Beverage	104,005	3.31	115,879	3.18
Total cost of sales	959,109	30.49	1,190,299	32.69
LABOR
Management	192,330	6.11	204,227	5.61
Staff	576,989	18.34	581,260	15.96
Employee benefits	118,996	3.78	122,994	3.38
Total Labor	888,315	28.24	908,481	24.95
PRIME COST	1,847,424	58.73	2,098,780	57.63
OTHER CONTROLLABLE EXPENSES
Direct operating expenses	146,669	4.66	145,357	3.99
Music & Entertainement	2,767	0.09	8,386	0.23
Marketing	52,579	1.67	69,883	1.92
Utilities	88,555	2.82	97,836	2.69
Administrative & General Expenses	80,252	2.55	78,269	2.15
Repairs & Maintenance	41,510	1.32	39,135	1.07
Total other controllable expenses	412,332	13.11	438,866	12.05
CONTROLLABLE INCOME	885,778	28.16	1,103,903	30.31
NON CONTROLLABLE EXPENSES
Occupancy costs	144,000	4.58	132,000	3.62
Equipment leases	-	-	-	-
Depreciation & Amortization	49,812	1.58	61,498	1.69
Total non controllable expenses	193,812	6.16	193,498	5.31
RESTAURANT OPERATING INCOME	691,966	22.00	910,405	25.00
Interest expenses	104,100	3.31	93,378	2.56
INCOME BEFORE INCOME TAXES	587,866	18.69	817,027	22.44
Income Taxes	235,146	7.48	343,150	9.42
NET INCOME	352,720	11.21	473,877	13.01

Last year Return on sales - 11.21%

Current year Return on sales - 13.01%

Since the return on sales is increased 1.8% which is more than 1% Lucir should receive a raise.