MM255 Assessment Answers Business Math And Statistical Measures 1
Jan 29,22MM255 Assessment Answers Business Math And Statistical Measures 1
Question:
Making Financial Business Decisioncisios
Unit 10 focuses on using financial methods and statistical data to inform alternative selection within business decisions.You have always wanted to own a restaurant and have now decided to go into business, purchase a building, and open an Italian Bistro. The items listed below provide information regarding the purchases you will need to make to start your business.
- The building and the land it sits on will cost $250,000 and you have 20% to put down on the property. Annual taxes are $6,000 and fire and liability insurance is $3,600.
- You have $150,000 of additional funds to allocate for refurbishing the grounds, building structure, interior design, and kitchen. 10% of the savings will be allocated to the grounds, 20% to the building’s structure, 20% to update the interior design, and 50% for kitchen installation and fire suppression systems.
- Tables are $200 each for 2 tops, $300 each for 4 tops, and $500 each for 6 tops. You plan to purchase eight (8) 2-top tables, six (6) 4-top tables, and ten (10) 6-top tables. Chairs cost $50 each. You are planning on being able to seat 100 people in the restaurant at a time and need 10 extra chairs. Silverware, tablecloths and napkins cost a total of $6,000, serving utensils cost a total of $3,000, and glassware cost a total of $5,000.
- Place/plate settings cost $35 each. You need to purchase three times the number of planned seats for turn-around and breakage. (Remember you are planning for 100 people in your restaurant.)
- Servicing carts, cooking equipment, prep tables, storage containers, and other supplies will cost a total of $16,000.
- Research suggests that the average receipt total per person is $12.80 and the average cost per meal is $6.86 for the Italian restaurants in your area. The research also suggests that tables are turned over for new customers between 13 and 21 times a day in your area, and that restaurants have between 40% and 60% occupancy fill rate each day.
Create a PowerPoint Presentation for this business venture.
The following is an outline of how your slides should be presented.
Slide 1: This is your title page. Include your name, project title, the course and section number and the assignment due date.
Slide 2: This slide is your introduction slide. This slide should summarize your new business venture, describe your restaurant concept (i.e. casual dining, bight atmosphere, etc.) and provide other helpful information. For example, restaurant name, what types of appetizers, salads, soups, entrees, beer and wine availability, and desserts you might serve, and hours of operation. Highlight what makes you restaurant special.
Slide 3: This is your building and real estate summary slide. This slide should include a small picture or building plan drawing of the building, and summarize the purchase price, down payment, and amount financed. The picture of the building can be obtained from a real estate website, or from a building plan drawing available on the Internet (be sure to cite this). This slide should also list the annual tax and insurance amounts. It should also include the monthly mortgage payment including principal, interest, taxes and insurance (PITI). The slide notes (section below the slide in PowerPoint) should contain the steps you took to calculate the monthly mortgage payment.
Slide 4 to 6: These slides should include your start up expenses. On these slides you would list the cost of purchasing all of the items listed in items 3, 4, 5 above (tables, place setting, kitchen equipment, etc.). Here you can have fun and include pictures of items, or include graphs of the cost. Be sure to list the total start up expense required to open the restaurant somewhere.
Slide 7: This is your revenue slide. Create revenues and food costs from your first 6 days of serving food. Present the average receipt total per person, the average cost per meal, number of times a table is sat or turned over, and fill rate or occupancy rate to estimate your restaurants revenues. This is another place where a graph could help illustrate your revenue potential.
Slide 8: Conclude your presentation with the “wrap up” of the concept and any final thoughts you might want to include.
Slide 9: List any resources you have used for this project. Be sure to include at least one reference from a reliable source. Because many of the concepts here involve reading from the textbook, remember to include a reference for your textbook, as well. Make sure your citations are presented in APA format.
Answer:
Introduction
Brief introduction about the project:
As an entrepreneur, we have started our business of restaurant and has opened Italian Bistro. For opening of the hotel, the building has been purchased at $250,000 and other supplies have been purchased. The name of the restaurant is Rosewood Dolomites. The hotel is having various special items in menu such as Caprese Salad with potato Sauce, Focaccia Bread, Pasta Carbonara, Mushroom Risotto, Lasagna, Panettone, Stuffed Ravioli, Focaccia Bread and Panzenella. Further, the menu will also contain various kinds and sizes of wines, Soups, entrees, beer and salads as well as deserts. The style of hotel will be based on bright atmosphere and cool dining and will be an attractive place for youngsters. The hours of operations will be 10.00 AM to 11.30 PM and the hotel will also provide home delivery facilities as well.
Pricing and drawing analysis:
To start the restaurant business, the building needs to be purchase which should have enough space for 100 chairs. The expected purchase cost of the building is $250,000. The owner is required to pay 20% as down payment for purchase and the down payment will be $50,000 ($250000* 20%). Further, the owner is also required to arrange funding for balance 80% i.e. $200,000 and there are lot of financing options available against the mortgage of building. The cheapest loan percentage is 8% p.a. interest rate with monthly payment plan with 10 years of maturity period. So, in the case the monthly installment will be $1,391 for 10 years which includes both interest and principal component (Guo, X., Ling, L., Yang, C., Li, Z., & Liang, L. 2013). The entity also need to take fire and liability insurance and the amount of premium will be $3,600 for tenure of one year. Further, the entity is also required to pay taxes on property and the amount of annual taxes will be $6,000. Thus, the total yearly payment for loan, insurance and taxes will be $10,990. Further, the building will have seating capacity of 100 persons at a time and the design and layout of building will be as below:
Startup expenses and other outlays:
The business owner needs to incur various start up cost for setting up the restaurant business. The startup cost includes various expenses such as legal and professional fee, purchase of supplies, purchase of kitchen and other equipment and table-tops and chairs, plate setting and other misc. supplies. The entity can either self-funding the start-up cost or can also take business or working capital loan as per requirement. In the case, the owner will be required to refurbish the building interiors, ground structure and installation of kitchen and fire suppression system. The total cost for refurbishment is $150,000. The entity is required to incur 10% on ground structure and the cost of preparation of ground structure will be $15,000 ($150,000 * 10%). The allocated cost for building structure is $30,000 and the updation of interior design is $30,000 (20% each of refurbishment cost). The major refurbishment cost is installation of kitchen structure and fire suppression cost will be $75,000 which is 50% of refurbishment costs (Michael Forrest Jones, 2013). Apart from refurbishment cost, the entity will be required to incur cost for purchase of table-tops. The entity will be required to purchase three types of top tables and the tentative cost of table- tops are as below:
| Type | Cost per unit | Qty | Cost |
| 2 tops | 200 | 8 | 1600 |
| 4 tops | 300 | 6 | 1800 |
| 6 tops | 500 | 10 | 5000 |
| 8400 |
In the case, the total table-top cost is $8,400. The owner is also required to purchase to purchase 100 chairs as per seating capacity and the entity is also required to purchase 10 additional chairs. The cost per chair is $50 and the total cost for 110 chairs will be $5,500. Apart from above-mentioned costs, the entity is required to purchase silverware, tablecloths, and napkins which will be cost around $6,000. The owner will also be required to purchase serving utensils and glassware which will be costing around $3,000 and $5,000 respectively. The owner is also required to incur plate setting costs which will be $35 and the entity is required to purchase three times of number of seats. Thus, the total cost of plate setting will be $10,500 (100 * 3 times * $35). The owner will also be required to incur $16,000 on purchase on servicing carts, cooking equipment, prep tables storage containers and other supplies. Thus, the total startup cost and its summary is as below:
| Particulars | Amount |
| Refurbishment costs | 1,50,000 |
| Grounds | 15,000 |
| Building structure | 30,000 |
| Interior design | 30,000 |
| Kitchen installation and fire suppression | 75,000 |
| Table tops | 8,400 |
| 2 tops | 1,600 |
| 4 tops | 1,800 |
| 6 tops | 5,000 |
| Chairs | 5,500 |
| Silverware and napkins | 6,000 |
| Serving utensils | 3,000 |
| Glassware | 5,000 |
| Plate setting cost | 10,500 |
| Kitchen supplies | 16,000 |
| Total start up costs | 2,12,800 |
Revenue and food costs analysis:
The average revenue per person is $12.80 and the food cost is $6.86 per meal per person. The entity is expecting that the tables will be turned 17 times approx. in a day because the average turn time is between 13 to 21 times and we have considered average turn times in other hotels in similar area (Chung, K. Y., 200). Further, we have also considered the occupancy rate 50% in a day because the occupancy percentage in the area is between 40% to 60% and we have considered 50% as occupancy rate. We have performed cost revenue analysis for 6 days which is as below:
No of person meals in 6 day week:
| Particulars | Amount |
| No of tables | 100 |
| Turn times | 17 |
| No. of turn times in a day (100* 17) | 1700 |
| Days in a week | 6 |
| No of turn times in a week (1700* 6) | 10200 |
| Occupancy rate | 50% |
| No. of persons meal in a week (10200* 50%) | 5100 |
The revenue for 6 day week will be $65,280 i.e. 5100 meals * $12.80
The cost for 6 day week will be $34, 986 i.e. 5100 meals * $6.86
Thus, in the case there is profit of $30,294 in a week and the entity is having huge profitability in a year considering 6 days data. The detailed profitability position can be understood from below chart:
Conclusion:
After performing detailed analysis, it can be concluded that the Italian restaurant business is profitable and the owner is required to incur various costs such as startup expenses, purchase of building and other expenses. The restaurant will serve various Italian foods and will be operating from 10.00 AM to 11.30 PM. The hotel is expected to operate at 50% occupancy and will earn $30,294 as profitability during 6 day week. The business is also expected to attract various customers. However, the business is also required to arrange its finances from debt and the cheaper source of finance is @8% Per annum. Apart from financing, the owner will self fund the start up cost and there will be no credit availed. Thus, the restaurant is expected to generate handsome amount of profitability during budgeted period.
References:
Michael Forrest Jones (2013). What Does It Take To Start A Hotel. Retrieved from https://www.forbes.com/sites/quora/2013/02/28/what-does-it-take-to-start-a-hotel/?sh=7afc46a26452
Guo, X., Ling, L., Yang, C., Li, Z., & Liang, L. (2013). Optimal pricing strategy based on market segmentation for service products using online reservation systems: An application to hotel rooms. International Journal of Hospitality Management, 35, 274-281.
Chung, K. Y. (2000). Hotel room rate pricing strategy for market share in oligopolistic competition—eight-year longitudinal study of super deluxe hotels in Seoul. Tourism Management, 21(2), 135-145.
