Thaifoon Restaurant Case

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Bo Zhang
EEE451 Case 4 Questions
September 11, 2012

Case 4 THAIFOON RESTAURANT

* Prepare a spreadsheet for the restaurateur to project his net profits. From exhibit 3, Thaifoon restaurant forecast that there would be 18 turns (5 lunch turns and 13 dinner turns) each week. And the owner planed to have 30 or fewer seats in order to meet the legal regulations and design. So it means there are 30 seats for each turn. Daily Turnover Ratio|

 | Lunch | Dinner |
Revenue | $12.00| $25.00|
Monday| 1| 1.5|
Tuesday | 1| 1.5|
Wednesday| 1| 1.5|
Thursday | 1| 1.5|
Friday| 1| 2.5|
Saturday | 0| 2.5|
Sunday | 0| 2|
Number of Seats | 30|  |

Moreover, the restaurant would open 52 weeks annually. Lunch bill would amount to $12 while dinner would amount to $25 per person. Therefore, for the seats of 30, the restaurant would have revenue of $360 ($12*30) for lunch per turn; and $750 ($25*30) for dinner per turn. Thus, the annual revenue would be $600,600 ($360*5*52+$750*13*52). Total Sales |

 |  |  |  |  |
Day| Lunch | Dinner| Total Profit| Total Sales|
Monday | $18,720.00| $58,500.00| $77,220.00|  |
Tuesday | $18,720.00| $58,500.00| $77,220.00|  |
Wednesday | $18,720.00| $58,500.00| $77,220.00|  |
Thursday | $18,720.00| $58,500.00| $77,220.00|  |
Friday | $18,720.00| $97,500.00| $116,220.00|  |
Saturday | $0.00| $97,500.00| $97,500.00|  |
Sunday | $0.00| $78,000.00| $78,000.00| $600,600.00|

For the fixed cost, from exhibit 4, I subtract amortization from the total projected annual cost, and add one month deposit paid to the landlord, which is 87,789-19,414= $68,375. Then variable cost based on the sales, which in total equals $397,371. So gross profit would be revenue- total cost (fixed cost+ variable cost)= $134,854. Then subtract amortization from gross profit, EBIT= $115,440.

Since the restaurant is owned by Mr. Phimphrachanh alone, so I think it might be a sole proprietorship. Based on the research, Canadians are taxed on both federal level and provincial/territorial level. The following chart shows the combined tax rate for Canadian individuals in 2006.

Since Mr. Phimphrachanh’s projected earnings before tax is between $72,735 and $118,285, his marginal tax rate is 43.41%. So he needs to pay $34,758%*21.05%+($36,378-$34,758)*24.15%+($61,206-$36,378)*31.15%+($69,517-$61,206)*32.98%+($72,102-$69,517)*35.39%+($72,756-$72,102)*39.41%+($115,440-$72,756)*43.41%=$37,884 and his net income is $77,556.

Thaifoon Restaurant Income Statement|  | Year 1|
Lunch turns| 260|
Dinner turns| 676|
Total turns| 936|
Revenues| 600,600|
Rent one month deposit| 1,282|
Total fix cost (projected cost- amortization+ deposit)| 68,375| Food cost (37% of food sales)| 178,932|
Drink cost (25% of drink sales)| 29,250|
Credit card cost| 9,009|
Labor cost (30% of total sale)| 180,180|
Total variable cost | 397,371|
Total cost| 465,746|
Gross profit| 134,854|
Admin expenses| 0|
Marketing expenses| 0|
EBITDA| 134,854|
Amortization| 19,414|
EBIT| 115,440|
Interest expenses| 0|
Earnings before taxes| 115,440|
Taxes| 37,884|
Net income| 77,556|

* What happens if he is 20% over or short? Prepare the adjusted spreadsheets as proof.

Based on the Income Statement projected for 2006, firstly, assume he is 20% short on sales. Then revenues would be $600,600*0.8= $480,480. Since the variable cost will change according to the sales, and fixed cost stays unchanged, the gross profit is $94,208. And after tax net income is $54,587. Thaifoon Restanrant Income Statement|  |

 | Year 1|
Lunch turns| 208|
Dinner turns| 540.8|
Total turns| 748.8|
Revenues| 480,480|
Fix cost| 68,375|
Food cost (37% of food sales)| 143,146|
Drink cost (25% of drink...
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