Marketing Case Study
Question
Answer the
following questions based on the standard cost control formulas presented this
chapter. I recommend that you print out the power point notes and
the formula review to use when completing this assignment. Be sure to
show all of your work for these calculations. It is okay to write this by
hand and upload a screen shot of your work.
1.
John runs a small family
restaurant in Lowell. He is currently utilizing the 5 standard cost
control tools in managing his business. His clam chowder recipe currently
has a yield of 100 portions. He anticipates a busy weekend and needs to
make enough to serve 330 guests, What should he do?
Calculate how he will make this
adjustment.
2.
The total ingredients
cost for 100 portions of clam chowder is $150.00. What is the portion
cost?
3.
If he makes 330
portions, what is the new portion cost?
4.
John wants to have his
food cost for the clam chowder be 33% of it's selling price. What should
he charge for his clam chowder?
5.
Based on the selling
price that you calculated above, what is the contribution margin for the clam
chowder?
6.
Sales information for
John's restaurant is as follows:
Forcasted revenue: $12,500
Non food expenses: $6,000
Required profit: $3,500
What are John's allowable food costs for the week?
7.
What is John's food cost
% based on the calculations above?
8.
Do you think that food
cost is attainable?
9. What
recommendations do you have for John?
Formula Review
- 5 Standard Cost Control
Tools:
Standard purchase specifications
Standard Recipes
Standard Yield
Standard Portion Size
Standard Portion Cost
- Adjustment Factor:
Used to adjust recipes when preparing the recipe for a different yield
than the recipe calls for.
Desired yield / Original yield
- Profit Pricing: Used
to calculate desired food cost %
Food revenues
-non food revenues
-desired profit
= Allowable Food Cost
- Food Cost % =
Food costs / Food revenues
- Portion Costs = Total
ingredient cost / # of portions
- Contribution Margin =
Food revenue - food costs
- Desired food cost % pricing
method: item food cost / desired
food cost % = minimum
item selling price
- Basic Income Statement:
Food revenue
-food cost
-labor cost
-all other costs
= Profit or loss


Solution
Answer the following questions based on the
standard cost control formulas presented this chapter. I recommend
that you print out the power point notes and the formula review to use when
completing this assignment. Be sure to show all of your work for these
calculations. It is okay to write this by hand and upload a screen shot of
your work.
1. John runs a small family
restaurant in Lowell. He is currently utilizing the 5 standard cost
control tools in managing his business. His clam chowder recipe
currently has a yield of 100 portions. He anticipates a busy weekend and
needs to make enough to serve 330 guests, what should he do?
Calculate how he will make this
adjustment.
ANSWER
Desired yield / original
yield = adjustment factor
Desired yield =330
Original yield =100
330 / 100=3.3
Adjustment factor =3.3
2. The total ingredients
cost for 100 portions of clam chowder is $150.00. What is the portion
cost?
ANSWER
Total ingredients cost /
number of portion = standard portion cost
$ 150 / 100= $1.5
=$1.5
Portion cost =$1.5
3. If he makes 330
portions, what is the new portion cost?
ANSWER
Let new amount be (X )
So,
Original amount * adjustment factor =new
amount
330*$1.5=$450
=$450
4. John wants to have his
food cost for the clam chowder be 33% of its selling price. What should
he charge for his clam chowder?
ANSWER
Desired food cost =
items standard cost / Desired food cost percent
$ 1.5 / 0.33
=$4.55
If the items cost him $1.5 then he needs to charge at least $4.55
5. Based on the selling
price that you calculated above, what is the contribution margin for the clam
chowder?
ANSWER
Contribution margins
=sales price – food cost
=$4.5 - $1.5
=$3.0
This is what is left after paying for food cost what is left over
to contribute to all other cost
6. Sales information for
John’s restaurant is as follows:
Forecasted revenue:
$12,500
Non food expenses: $6,000
Required profit: $3,500
What are John’s allowable food costs for the week?
ANSWER
Allowable food cost = Forecasted revenue –non
food expenses –required profit
=$12,500-$6,000-$3500
=$3000
Allowable food cost = $3000
7. What is John’s food cost
% based on the calculations above?
ANSWER
Food cost percent =
Allowable food cost / Forecasted Revenue
=$ 3000 / $ 12500
=0.24%
8. Do you think that food
cost is attainable?
Answer
Yes, it is attainable. Since the percentage of
sales income spent on food ingredients is favorable. John
should further lower his adjustment factor to a lower rate by rationalizing the
recipe.
9. What
recommendations do you have for John?
Answers
John should continue lowering the cost of food
so as to increase his net profit base and further lower his adjustment factor
to a lower rate by rationalizing the recipe.
Formula Review
5 Standard Cost Control Tools:
Standard purchase specifications
Standard Recipes
Standard Yield
Standard Portion Size
Standard Portion Cost
- Adjustment
Factor:
Used to adjust recipes when preparing the recipe for a different yield
than the recipe calls for.
Desired yield / Original
yield
- Profit
Pricing: Used
to calculate desired food cost %
Food revenues
-non food revenues
-desired profit
= Allowable Food Cost
- Food
Cost % =
Food costs / Food revenues
- Portion
Costs = Total ingredient cost / # of portions
- Contribution
Margin =
Food revenue - food costs
- Desired
food cost % pricing method: item food cost / desired food cost % = minimum item
selling price
Basic Income Statement:
Food revenue
-food cost
-labor cost
-all other costs
= Profit or loss




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