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CHARLEY FAMILY STEAK HOUSE

IMPORTANT AND RELEVANT FACTS

(Describe your understanding 1 or 2 sentences)

1. A restaurant business
2. Performance measurement scheme – Achieve Sale and Profit Target- Bonus 25% of Salary
3. Budget prepared for 2008 with certain assumptions on operations
4. Budget prepared in consultation with Manager.
5. Opportunities in the area
6. New person appointed as manager – Promotion
7. Efforts by manager

Summary of assumptions on operation (Exhibit 2)


(Explain important items as you understand)

2008 Budget and Actuals (Exhibit 2)

Revised budget (Expenses) for Actual sales - 2008


Particulars Basis Budget Actual Variance
Amount Amount
Gross Sales Given 1936025
Net Sales Given 1726725

Expenses
Food 55% of Gross Sale 1064814 1025870 38944 F
Labour Calculation 204464 185800 18664 F
Other Expenses 8% of sales 154882 152450 2432 F
Advertisement 3.5% 67761 78625 10864 U
Misc. Fixed 3000 3320 320 U
Depreciation 24000 24000
Insurance 9400 9780 380 U
Licence Fees 11700 10940 760 F
Rent Base 72000 72000
Rent Overage 6801 6801
Management Expenses 95000 98000 3000 U
Total Expenses 1713822 1667586
Profit 12903 59139

(Identify Controllable and Non-Controllable Expenses)


(Total Amount of such items)

Calculation of Labour Expenses: (Exhibit 4)


Fixed (Cook salary) (8000 * 13.00) 104000
Variable
For 3850 (32032*3) 96096
For 4025 96096*4025/3850 100464
__________
204464
ANALYSES THE OPERATING DATA
(Exhibit 1 Support data) (Write comment in detail)

 Customer count increased


 Lunch Dinner ratio changed
 Higher price reduced
 More discount

Food cost -Both price and usage are favourable –(2% price)

Labour
Cook- Hours same
Rate reduced

Other Hours decreased (Required 32032/3850*4025= 33488, Actual hours 26400


Rate increased (Rs. 3 to 3.25)

Sales
More customers but More discount

Discussion
Did efforts pay?
Control on discount coupon?
Should profit also be yardstick to measure performance or Sales sale less direct and variable cost
base?
Amount of bonus linked to sales, profit or salary (could be lower higher?)

Your Suggestions
To improve scheme
Change in MIS, Structure, etc.
Overall evaluation MCS IN Company