Final Exam Study Guide HFT3424 Key Points from Test 1 Know the basic ratios and equations o Profit Total Revenue Total Expenses o Assets Liabilities Owner s Equity o Profit Margin percentage Profit Sales If sales were 100 000 and expenses were 60 000 100 000 60 000 40 000 The percentage is 40 000 100 000 40 Lets just say Bill s bookstore sells 1 000 in T shirts on game day The labor costs 500 the t shirts cost 300 other expenses 200 Because the costs add up to 1 000 no profit was made therefore the profit margin is equal to 0 o Cost of Goods Sold COGS Sales Cost of goods sold when food sales are 1 000 labor costs 600 overhead Expenses 100 and food costs 300 The only numbers that matter are food sales and food costs 300 1 000 30 Determine the total cost of goods sold for alcohol when total sales 1000 beer 19 liquor 32 wine 33 There is not enough information to tell because you can t just add up the percentages to get the total The sales and prices of each one are unknown given just the percentage You KNOW for a fact that the costs of all alcohol can t be the same Now if the question said o Beer Sales were 500 at 19 Wine Sales were 2 500 at 33 Liquor Sales were 700 at 32 you can calculate the COGS for all alcohol o 500 x 19 95 2 500 x 33 825 700 x 32 224 o Add the totals COGS for alcohol 95 825 224 1144 Total sales 500 2 500 700 3 700 o COGS Sales 1144 3700 3091 31 91 o Occupancy Rate percentage Rooms sold rooms available not given 130 x 40 5200 5200 40 130 If there are 200 rooms in the hotel and room rates are discounted to 85 per night with 120 rooms sold what is the occupancy rate percentage The room rate does not matter don t let occupancy rate confuse you 120 200 6 The occupancy rate percentage is 60 o Average Daily Rate Room Revenue Rooms sold This season Hotel Duval has room rates for 130 per night if they sold 40 out of their 100 rooms what is the average daily rate Remember that you must calculate the room revenue first if So room revenue room rate times room sold OR you may realize that in the question the room rate was given so all the calculating was really not necessary If Hotel Duval makes 5 500 in room revenue and sells 40 of its 100 rooms then you would calculate o 5 500 40 137 5 average daily rate o Debt Ratio Liabilities Member Equity Publix has taxes payable and salaries payable accounts totaling 200 000 Owner s Equity accounts total 1 000 000 The debt ratio is 200 000 1 000 000 2 o Covers per hour Total covers number of operating hours Cancun s has 300 covers on a Thursday night in which they re only open 4 hours 300 4 75 covers per hour o Turn Rate Seat Turnover Total covers number of seats With the average price of 2 00 per drink Prime Time sold 600 covers in their 120 available seats in a matter of 3 hours What is the turn rate 600 120 5 Always remember that there will be extra numbers in the questions that aren t needed to find the answer o Inventory Turn Rate Cost of Inventory Sold Average Inventory Given 10 000 in food sales 40 COGS 800 average inventory Find food costs 10 000 x 4 4 000 4 000 800 5 Turn rate o Breakeven Fixed Costs Sales price variable costs Monthly fixed costs for a hotel is 60 000 and rooms sell for 250 a night with variable costs of 50 per night 60 000 250 50 60 000 200 300 This means that 300 rooms must be sold to breakeven o Return on Member s Equity Net Profit Total Member s Equity Remember Profit is not the same as sales So if the question said sales member s equity it would be incorrect Financial Statements o Balance Sheet Indicates the efficiency and profitability of an operation Includes all assets cash inventory receivable accounts buildings etc liabilities all accounts payable depreciation and owner s equity stocks retained earnings Capitol Expenses would be found on the balance sheet You may think because it is an expense it would be on the income statement but it is considered an ASSET Principle such as mortgage for a house or a car builds equity so it would be found on the balance sheet as well o Income Statement The Profit and Loss Statement Includes all revenue income which includes sales profits and expenses Includes electricity expense green fee revenue interest expense because it is a financial expense o Statement of Cash Flows Reports the cash generated and used during the time interval specified in its heading Includes operating investing and financing activities The Types of Costs o Fixed Costs Those that do not vary with revenue over the short run usually a year or less Over the long run all these costs can change Ex Property tax insurance expense rent interest expense etc o Variable costs Those one that increases or decreases in direct or linear fashion with increases or decreases in sales Ex The costs of food and beverage o Semifixed or Semivariable cost Most have an element of fixed expense and an element of variable expense most expenses do not have a direct relationship to sales on a straight line basis Ex Labor cost management salaries hourly staff wage Benchmarks o Numbers have to be compared to other numbers to have meaning o Reasonable benchmarks Restaurants around 60 A low percentage like 5 is not reasonable this means the operations are below standard and not achieving efficiency Clubs 50 Key Facts to remember o The largest expense for most restaurants is labor and cost of goods sold o It is NOT the GM s responsibility to check every number on each of the statements o Financial Management Cycle 1 Operations produce the numbers 2 Accountants prepare the numbers and provide management reports and financial statements 3 Accounting and Operations analyze the numbers 4 Operations apply the numbers back to the business Key Points from Test 2 Prime cost o Direct materials direct labor o For a restaurant this would be the summation of the food and beverage costs and the labor costs o From the table below that I came up with the prime cost would be 425 000 330 000 755 000 DESCRIPTION Revenues Food and Beverage Costs Labor Costs Other Costs Total Expenses Profit DOLLARS 1 000 000 425 000 330 000 100 000 855 000 145 000 PERCENTAGES 100 42 5 33 10 85 5 14 5 If other costs category increases by 40 how much would profits be Everything else stays the same o Multiply 100 000 by 4 100 000 x 4 40 000 o You know that because a portion of costs increased by 40 …