Restaurant Sedap Gila is a catering company that serves food and beverages at parties and business functions. Sedap Gila’s business is seasonal, with a heavy scheduling during the summer months and holidays and a lighter schedule at other times.
One of the major events Sedap Gila’s customer request is a cocktail party. She offers a standard cocktail party has estimated the cost per guest as follows:
Food and beverages |RM16.00
Labour (0.5 hour @ RM9.80/hour) |RM4.90
Overheard (0.5hour @RM18.54/hour) |RM9.27
Total cost per guest |RM30.17
The standard cocktail party lasts three hours and Sedap Gila hires one worker for every six guests, so that works out to one and a half-hour of labour per guest. These workers are hired only as needed and are paid only
for the hours they actually work. When bidding on cocktail parties, Sedap Gila adds a 14% mark-up to yield a price of about RM32.00 per guest. She is confident about the estimates of the costs of food and beverages and labour but is not as comfortable with the estimate of overhead cost. The RM18,54 overhead cost per labour hour was determines by providing total overhead expenses for the last 12 months
by total labour-hour for the same period.
Monthly data concerning overhead costs and labour hours is as below:
|Month |Labour Hour| Overhead Expenses
January |2,200 |RM42,000
February |2,500 |RM46,000
March |2,700| RM47,000
April |3,900| RM51,000
May |4,200| RM54,000
June |5,200| RM58,000
July| 6,200| RM61,000
August |7,200| RM64,000
September |6,700| RM62,000
October |4,200| RM55,000
November| 3,800 |RM51,000
December |6,200| RM59,000
Total| 55,000| RM650,000
QUESTIONS:
•You should perform the following analysis:
oSeparate the fixed and variable costs from the mixed costs.
oDetermine the relevant costs for Break-even analysis:
Revenue
Variable costs
Contribution margin
Operating overheads
oDetermine the Breakeven point of the company’s.
oDetermine the Safety Margin of the company during the 5 years.
oDetermine the Degree of Operating Leverage. Give the implication of your findings.
oHow is the company performing lately?
oDoes the company have a prospect in the future?
Please provide a word copy of your answer.
