Restaurant Profit and Loss Excel by omg11669

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									            Name:                                                                    Date:
        Instructor:                                                                Course:
Managerial Accounting, Second Edition by James Jiambalvo
Solving Managerial Accounting Problems Using Microsoft Excel
                        for Windows Templates by Rex A Schildhouse
Exercise E7-6 Incremental Analysis and Opportunity Costs
Sawyer's Seafood Restaurant has been approached by Wellsworth Real Estate, which wants to hold an employee
recognition dinner next month. Katie Miller, a manager of the restaurant agreed to a charge of $75 per person, for food,
wine, and dessert, for 120 people. She estimates that the cost of unprepared food will be $20 per person and beverages
will be $10 per person.
 To be able to accommodate the group, Katie will have to close the restaurant for dinner that night. Typically, she would
have served 130 people with an average bill of $45 per person. On a typical night, the cost of unprepared food is $15 per
person and beverages are $12 per person. No additional staff will need to be hired to accommodate the group from
Wellsworth.

Required:
Part a . Calculate the incremental profit or loss associated with accepting the Wellsworth group.

           The incremental profit is as follows:
                     Revenue                                                                        Amount
                     Less cost of unprepared food and beverage                                      Amount
                                                                                                    Formula
                       Lost revenue                                                                 Amount
                       Cost savings for food and beverage                                           Amount
                       Loss profit                                                                  Formula
                       Net                                                                          Formula

Part b . What was the opportunity cost of accepting the Wellsworth group?

Narrative answer:




Part c . Should Katie have considered any qualitative factors in her decision? Explain.

Narrative answer:




      FileName: 9638a334-3486-4ce0-8a1b-2adf65ca7226.xls, Tab: Exercise E7-6, Page 1 of 2, 7/13/2011, 6:17 PM
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