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Thank you very much for your help.
can you please help me with small bit of the following question.Sandwich queen is looking to expand its restaurant facilities to increase its seating capacity a further 40% results for the current year are as follows.
000
food sales 200
drink sales 170
equals 370food costs 145
drink costs 77
staff costs 40
other costs 20equals 282
cash flow equals 88
sales and variable costs will increase in line with the seating capacity increase. the other costs are 40 percent fixed. an extra employee will be required to serve the extra seating capacity. there are currently 4 employees on an equal wage.
what is the relevant annual net cash flow to the nearest 000 of the proposed expansion.this the way i have done my arithmatic.
with the proposed expansion costs.
food sales 200*40/100 equals 80
drink sales 170*40/100 equals 68
total revenue equals 148food costs 145*0.4 equals 58
drink costs 77*0.4 equals 30.8
staff costs 40/4+1 equals 8
other costs 20*0.4*0.6 equals 4.8 total costs equals 101.6relevant annual net cash flow equals 46000.
the answer from the book says its 44000.. they have multiplied the extra staff but i have added instead can you please explain to me the question says an extra staff will be required to serve the extra seating capacity.
Many thanks.The question could be worded a bit better.
However, although food and drink costs will increase by 40% because that is the increase in the seating capacity, staff costs will not increase by 40%.
The question says that to serve the extra capacity it needs one extra employee. So the extra staff cost is 40/4 = 10 (and not 8).
thanks for the reply.
I cant able to see where the extra staff is allocated in terms of the arithmetic. staff costs have only been divided by the existing 4 employees if though the question says an EXTRA STAFF IS REQURIED .. can you please show me if there is an alternative way that can be done. I hope that would make me easier to understand the question very well.
Many thanks.
But there is no alternative way and there is no need for one anyway.
The question says that there are currently four employees. They are currently paid 40, and they are on equal pay. So each employee is paid 40/4 = 10.
It also says that one extra employee is needed because of the increased seating capacity.
Therefore it will cost an extra 10.
thank you very much. my understanding is I will divide the number of the staff given in the actual question regardless weather an extra staff or more will be required in the future.
Again thank you very much.
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