Problem: Lauren Stephens owns William's Restaurant, which sells hamburgers for carry out or drive through only. Each Hamburger sells for $2.
Lauren employs several part-time employees and a full-time manager. She leases the building and hires a cleaning company to provide services on a weekly basis. The
Manager, who is paid a monthly salary carries out all administrative functions such as hiring, scheduling, and counting cash.
The following expenses were incurred in November.
|
Ground Meat
|
$1,500
|
|
Lettuce
|
$350
|
|
Tomatoes
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$400
|
|
Buns
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$400
|
|
Condiments
|
$70
|
|
Part-Time, Cooks
|
$2,500
|
|
Part-Time, Servers
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$2,250
|
|
Wrapping paper & bags
|
$30
|
|
Manager's salary
|
$2,100
|
|
Utilities
|
$600
|
|
Depreciation, grills
|
$350
|
|
Depreciation, signs
|
$100
|
|
Advertising
|
$75
|
|
Rent
|
$800
|
|
Cleaning Service
|
$300
|
The restaurant sold 10,000 hamburgers during the month, and there is no WIP inventory at the end of the month.
Questions to do:
Q1. Identify each expense as fixed or variable.
Q2. Classify each cost as one of the following: direct materials cost, direct labor cost, overhead cost, or period expense.
Q3. Prepare an income statement for November.
Q4. Compute gross margin as percentage of sales.
Q5. Compute net income as a percentage of sales. What are the implications of your findings in terms of risk? Explain.