hotplate restaurant is located close to centre of town. The restaurant is very popular and has an excellent reputation for range of menus. However, high levels of expenditure on staff and materials, and this has resulted in very low levels of profit. The owner, has been looking at expansion opportunities as the restaurant is serving close to its maximum capacity of 700 meals per month. He hopes that expansion will result in much higher profits for the restaurant.
the trading results for July 2010 have just made available and are shown below:

turnover (650) meals: £ 19,500
Costs:
Materials: £4,810
staff/labour: £7,575
power: £650
rent: £1,500
vehicle running costs: £320
other fixed costs: £3,980

total costs: £18,835
net profit: £665

materials and power are available costs with respect to the number of meals produced.all other costs are fixed with the exception of labour. The data for the last six months indicates some variability in labour costs with the following levels observed

Months 2010 Number of Meals Served Labour Cost (£)
February 658 7619
March 598 7289
April 558 7069
May 594 7267
June 640 7520
July 650 7575

the property adjacent to the restaurant has become vacant. The rent of the new premises is £ 1,500 per month, and lease of furnishing, fittings and equipment would add a further £ 940 per month to the costs. Restructuring work is expected to cost £ 30,000 and the cost will be depreciated over five years on straight-line basis.

if the adjacent property is taken on, owner plans to spend £ 250 per month on local advertising to stimulate local demand. More staff will need to be employed, and this will increase the fixed costs of labour by £1,250 per month. The variable cost of labour and power are unlikely to change. However, due to an increase in level of material purchases, the restaurant's discount on materials will increase, and this is expected to reduce overall materials cost by %6 ( both current restaurant and proposed extension).

the expansion is likely to increase the number of meals by 400 meals per month giving total sales of 1,050. However, owner agrees that addition sales in the new restaurant might be as low as 850 meals or as high as 1,250 meals, and as high as 600 meals( its capacity). ıt is anticipated that selling prices will be held at current levels.

for the purpose of analysis, it may be assumed that sales from the current restaurant will be 650 per month.

REQUIRED

a. produce a statement that shows the contribution/ month and the net profit/month under marginal costing for the current restaurant with sales of 650 meals/month.

b. calculate the monthly break-even point of the existing restaurant and the combined restaurant.

c. prepare a marginal costing statement to show the monthly combined profit earned by the enlarged restaurant for the following levels of sales:

850 meals per month
1,050 meals
1,250 meals per month

please help me about the question.I'm not good at that so I'm so confused:S

Thank you for taking the time to copy your homework to AMHD.
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Do not get it wrong. I just want to learn the ways how I'm going to get the solutions

Guys I just want to learn something. I ve done existing restaurant but I confused about combined restaurant... are going to use current restaurant's selling price and units... do you have any idea?

You make it difficult for people to help you. Not only posting 3 different places so we don't know what's going on, then adding new information to one post that wasn't anywhere else... very confusing.

And if you don't tell us something, give us work to check or ask what you're confused about, all we're doing is looking at some very long, involved problem, wondering what the heck you need. You've said nowhere that you had the first part done. We can't just guess at what you need. I'm not going to spend my time on something this involved without having something to do on.


the property adjacent to the restaurant has become vacant. The rent of the new premises is £ 1,500 per month, and lease of furnishing, fittings and equipment would add a further £ 940 per month to the costs. Restructuring work is expected to cost £ 30,000 and the cost will be depreciated over five years on straight-line basis.

if the adjacent property is taken on, owner plans to spend £ 250 per month on local advertising to stimulate local demand. More staff will need to be employed, and this will increase the fixed costs of labour by £1,250 per month. The variable cost of labour and power are unlikely to change. However, due to an increase in level of material purchases, the restaurant's discount on materials will increase, and this is expected to reduce overall materials cost by %6 ( both current restaurant and proposed extension).

If they are expanding, does it not seem reasonable that the costs they're incurring now will remain? How would they get rid of their current rent simply by expanding? The above tells you what will change. Assume it's in addition to the current costs, except for the materials, which you'll need to reduce by the 6%. It's logical that this reduction will count for all materials -- their suppliers aren't going to charge them one price for the initial space and a different price for additional space when it's going to still be all one restaurant. Try to think about what logically will happen. (That is, picture what's happening instead of just getting caught up in accounting.)

Remember that there's a variable portion of labor and that materials and power are variable. So you need to know what those costs are per meal. (Then reduce materials by 6%.) Variable is based on sales, so you have to have the per meal amounts in order to know what costs would be at different sales levels.


c. prepare a marginal costing statement to show the monthly combined profit earned by the enlarged restaurant for the following levels of sales:

850 meals per month
1,050 meals
1,250 meals per month

The above instructions tell you exactly how many units to do. And does it say anything about the selling price changing? You need to read very carefully what it's telling you.

Why do you keep insisting on making it so difficult for anyone to help you?

You just posted a new thread, with a question and answers to be checked, but only posted half the problem - and none of the information about the costs involved! How do you expect anyone to help you that way?

I had to track this down to find the original whole problem. So instead of spending my time going through the problem so I can help you, I'm wasting time tracking down posts.

I've deleted your other thread. And I'll copy the important part and your actual question into another post.

If you have further questions about this problem, put them in this thread where the problem is. I'm not tracking this down again.

From the other thread:


c. prepare a marginal costing statement to show the monthly combined profit earned by the enlarged restaurant for the following levels of sales:

850 meals per month
1,050 meals
1,250 meals per month

I just want to ask you that will we separate meals like current:650 increased:200 Combined:850 or is it true way??
850 Meals
Sales Revenue £ 25,500
(850 * £ 30)
Variable costs £ 11,441
(850 * 13.46)
Contribution £ 14,059
Less
Fixed Overhead £ 14,240
Profit £ (181)


by the way current number of mail per month 650 and selling price 30 pounds, variable costs per unit 13.46

However, after tracking down the problem, I no longer have time at the moment to go through any of it and check these figures. I will try to get to it later.

At the moment I will say that "marginal" is generally meaning the additional. i.e. what would be the additional from 650 meals to 850 meals? Versus the actual for the 850, what would the additional 200 add to the revenue/costs? How they want you to actually set it up I do not know - there should be examples in your book. The important thing is to be clear about what you're doing.

850 Meals
Sales Revenue £ 25,500
(850 * £ 30)
Variable costs £ 11,441
(850 * 13.46)
Contribution £ 14,059
Less
Fixed Overhead £ 14,240
Profit £ (181)

This is OK. Because it says to prepare a combined statement at 850, 1050 and 1250, my opinion is that you don't need to show the 200 increase over the 650 from the original statement. But probably need to show 1050 and 1250 as 200 increment increases. That, however, is only an opinion - you still need to check your text for how they set these up.

But the figures are fine for 850.