Question: (a) Describe the benefits that derive from preparing a profit and loss statement using the contribution margin format(CMF).
(b) In what ways might a manager use cost-volume-profit analysis?
2 Paul Hulse, the owner of the Hulsey Restaurant in West Auckland, recently attended a management training seminar in which he was shown the benefits of using the contribution format to prepare profit and loss statements. He now wants to see his restaurant's profit and loss statement prepared using the contribution margin format. In the year ending 31 December 20X1, the restaurant sold 20,000 covers with an average cover price of $25. Variable food and drink costs average $5 per cover and the head chef's salary includes a performance-related component giving him a commission of $0.8 per cover sold. All the hotel's remaining costs can be viewed as fixed. The restaurant's profit and loss statement presented in conventional format for the year ended 31 December 20X1 is as follows:
