HOTS Assignment #2 -Budgeting (1)
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Zheng Chung Budgeting Questions
1.
Zheng Chung is the managing owner of the Stillwater Grill. 2022 was good year for him. Now he is preparing his 2023 budget. Using the information Zheng believes will be
true, help him complete the dollar and percentage amounts in the budget worksheet that follows, then answer the questions he has about next year. Based upon his sales histories, sales projections, and cost records, Zheng predicts that in 2023 his operation will experience:
A 6 % increase in food sales
A 4 % increase in beverage sales
No change in food or beverage product cost percentage
Salaries and wages that will increase 3.5%
Benefits that will increase 10%
An increase in all other operating expenses (except depreciation) of 2%
A depreciation schedule that calls for a $750.00 per month entry
Interest payments for loans that will total $1,100 per month
Tax payments that are estimated to be 25% of income before income taxes The Stillwater Grill
Budget Worksheet for September 2019
2022
Actual
%
2023
Budget
%
SALES:
Food
346,500
75.3%
Beverage
113,500
24.7%
Total Sales
100.0%
COST OF SALES:
Food
116,500
33.6%
Beverage
18,750
16.5%
Total Cost of Sales
GROSS PROFIT:
Food
230,000
66.4%
Beverage
94,750
83.5%
Total Gross Profit
OPERATING EXPENSES:
Salaries and Wages
72,500
15.8%
Employee Benefits
12,400
2.7%
Direct Operating Expenses
16,550
3.6%
Music and Entertainment
3,200
0.7%
Marketing
6,650
1.4%
Utility Services
11,950
2.6%
Repairs and Maintenance
3,500
0.8%
Administrative and General
12,750
2.8%
Occupancy
30,000
6.5%
Depreciation
8,400
1.8%
Total Operating Expenses
Operating Income
Interest
14,000
3.0%
Income Before Income Taxes
Income Taxes
33,213
7.2%
Net Income
a.
What will be Zheng’s total sales in 2023
b.
What will be Zheng’s total cost of sales in 2023?
c.
What will be the amount Zheng will spend on salaries, wages, and employee benefits in 2023?
d.
What is the estimated amount of income taxes Zheng will pay in 2023?
e.
What does Zheng estimate will be his operation’s net income percentage (profit margin) in 2023? How will that compare to his 2022 percentage?
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• Assume you are working on budgeting for the room department of your hotel.
• Assume the hotel’s ‘Room Revenue (Sales)’ was $1,640,000 during 2019. Based on the lodging forecast report, you expect the ‘Room Revenue (Sales)’ to increase by 3.7% next year.
• Assume the ‘Guest Supplies’ expenses (variable costs) from the room department was $246,000 during 2019. For 2020, this variable cost will remain at the same percentage of the Room Revenue (Sales) as experienced in 2019.
• Assume the ‘Salaries’ expenses (fixed costs) from the room department was $280,000 during 2019. For 2020, this fixed cost will increase by 2% due to the expected increase in living expenses in this area.
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(a)
(b)
(c)
(d)
(e)
(h)
(i)
(j)
Question
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Quarter 2
Quarter 3.
Quarter 4.
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This Year 2022
2,000
2,500
3,000
3,500
11,000
Next year 2023-
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5,000
6,000
7,000
22,000
The selling price in 2022 was 90 and it will be
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