GLI 003 Managerial Accounting Assessment Paper

GLI 003 Managerial Accounting Assessment Paper

Below is the information related to a London-based restaurant. 

Name of the restaurant: Ella Mexicana Restaurant

Name of the chef: Ella Rodriguez

Location: Central London

Style: Mexican fine dining

Opening time: from Tuesday to Sunday for both lunch and dinner all year round.

Number of seats: 15

Average turnover: 1.5 times

Sample menu

Starters

Yellowtail ceviche, salsa verde, avocado £12

Octopus, guajillo oil, charred onion £15

Tlayuda, black bean puree, cheese, wild mushrooms with macha sauce £9

Mains courses

Chicken thigh, almond mole, carrots, jerusalem artichoke £23

Talla style sea bream £27

Slow cooked pork, radish, pickled green chiles £25

Desserts

Fantastic Mexican churros, caramel and chocolate feast £8

Fresh explosion of kiwi, apple, fennel £9

Famous three milks cake with cajeta caramel and walnuts £9

Drinks

Margarita £16

Cerveza/Beer £7

Soft drink £4

Section 1 – Activity of the restaurant (12 points)

1. Calculate the number of covers sold for the Ella Mexicana Restaurant per week. (4 points)
2. Calculate the number of covers sold for the Ella Mexicana Restaurant per year. (4 points)
3. Estimate the average check. The average check only focuses on the consumption of food and beverages. You may use the available information in section 2 to answer this question. (4 points)

Section 2 – Work with the income statement (45 points)

The Income Statement for the restaurant dated 31st December 2019 has been prepared and published. The details are shown below:

Ella Mexicana Restaurant Summary Income Statement For the year ended December 31, 2019
Sales
Food	£      750,000
Beverage	£      250,000
Merchandise and others	£         25,000
Total sales	£  1,025,000
Cost of sales
Food	£      215,000
Beverage	£         48,000
Merchandise and others	£         10,000
Total Cost of sales	£      273,000
Labour
Management (salaries)	£      100,000
Staff (wages)	£      160,000
Employee benefits	£         60,000
Total Labour	£      320,000
Prime cost	£      593,000
Other controllable expenses
Direct operating expenses	£         50,000
Music and entertainment	£           3,000
Marketing	£         30,000
Utilities	£         40,000
General & Administration expenses	£         35,000
Repairs and maintenance	£         18,000
Total Other controllable expenses	£      176,000
Non – controllable expenses
Occupancy costs (= rent expense)	£         80,000
Equipment leases	£           6,000
Depreciation and amortization	£         20,000
Total non -controllable expenses	£      106,000
Restaurant operating income before taxes	£      150,000

Note: Depreciation and amortization have been calculated using the straight-line depreciation method

1. Classify the costs and expenses of the income statements into fixed, variable, mixed and stepped costs. (15 points)
2. Prepare a vertical analysis of the income statement. Remember that the cost of sales of each element depends on the revenue associated to it. Keep 2 decimals for your calculations.  (30 points)

Section 3 – Costs management and breakeven analysis (132 points) 

We know that fixed costs don’t change, and that variable costs vary according to the activity of the restaurant. Controllable expenses are often the hardest costs to identify. The activity pattern over the year 2019 has been identified as follows: GLI 003 Managerial Accounting Assessment Paper

January	5%
February	6%
March	4%
April	5%
May	10%
June	11%
July	9%
August	10%
September	7%
October	9%
November	8%
December	16%

 

1. Following this pattern, prepare a table for the year 2019 showing the details of all sources of revenues and all the costs details per month. All controllable expenses can be divided equally over the year to ease your work. (42 points)
2. Prepare a summary table to show the details of the meals sold and total costs per month in 2019. You can use the template below (28 points).

Note that only food and beverages are considered as the main revenues and thus should be used for the calculations of the number of meals sold.

Month	Meals sold	Total costs
January
February
March
April
May
June
July
August
September
October
November
December
Total

1. Using the regression analysis method, determine the fixed and variable costs for the year. (12 points). Don’t forget to show the details of your steps and calculations (28 points)
2. How many meals did Chef Ella prepare and sell in order to break even? (6 points)
3. When in the year did Chef Ella reach that break-even point? (6 points)
4. If the estimated activity is correct, and working with your results from question 3, what profit would be made? (6 points)
5. Are you surprise by your results? Explain, (4 points)

Section 4 – Cash management (35 points)

Prepare a cash budget for the first semester of 2020 (35 points). Round all figures to the closest pounds. Show in separate lines the various receipts and payments.

To do so, consider the following information:

• The pattern of sales is expected to be similar as in 2019 and can be split as follows (as previously stated):

January	5%
February	6%
March	4%
April	5%
May	10%
June	11%
July	9%
August	10%
September	7%
October	9%
November	8%
December	16%

 

• Additional information regarding the sales should also be considered:
  • 50% of all sales is coming from small parties and is received at the moment of the sale.
  • 20% of all sales come from clients contracted via a new partner, a tour operator, sending groups of tourists to the restaurant. The tour operator always confirms the number of guests per group a week before the dinner. Once the group had dinner, an invoice is sent to the tour operator and should be paid no later than the month following the dinner.
  • The rest of the sales revenue comes from private events such as banquets. In this case, half the total amount of the invoice is requested to be paid by the clients the month prior the event. The rest is requested to be paid right after the event.

• Variable costs follow the same pattern as the sales activity. All other costs are considered fixed for the preparation of this cash budget (as previously stated).

 

• The payments of the different suppliers follow the pattern below:
  • All suppliers related to beverages have agreed to receive all payments up to 2 months after the purchase.
  • Suppliers related to food are working differently. Thirty percent of them have requested a payment at the moment of purchase. Forty-five percent have agreed to receive the payment up to a month after the purchase. The rest agreed to receive the payments up to 2 months after the purchase.
  • Suppliers related to merchandising requested an online payment at the time of the

purchase.

• It has been estimated that the cash availability on January 1st, 2020 will be half of the net income available at the end of 2019.
• Chef Ella is planning to renew part of her kitchen equipment in March 2020 as the activity is less busy. The new equipment costs £278,000. She will pay half of it at the time of purchase. The remaining will be paid equally over the next 5 months. To help financing her project, she went to the bank and negotiated a 3% interests – loan. The loan will cover 75% of the equipment value and will be received when the purchase is made. Repayment of the loan and the interest will start in July 2020.

GLI 003 Managerial Accounting Assessment Paper

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