FNES 275

Spring 2015
Financial Management Assignment

Due: May 14, 2015

This is a group assignment due next week.

Group of 5-7 students.
Designated Leader: Kimberly Bacon
Scribe:Emmanuel Aguilar
Organizer: Ivonnet Asencios
Planner: Hayley Kessler
Presenter _________________
Timekeeper and Communicator: Jessica Cimafranca
You are the management team of a foodservice business- healthcare, restaurant, club, catering, etc.
The group Leader will insure that the positions are all filled and the Planner and Organizer will insure that all of
the questions are allocated. The Timekeeper/Communicator will insure that the information is sent to the group
and that the Scribe has written the document to be ready for next Thursday. All members of the team are
responsible for the success of this project.
Catering
1. What are 5 major business expenses that should be considered in you establishment? Provide brief
description and why. (10)
One major business expense is labor. As a catering hall we will need to hire chefs, waiters, event planners, bus
boys, bartenders, etc. There is a lot of labor needed and salaries to be paid. We must consider the cost of hiring
these employees, how many we need to hire, and how we will afford the labor. Another business expense is the
cost of food. We will be producing large quantities of food for events and must consider how much to purchase
and how to reduce waste. Another cost to consider is basic utilities like electricity, heating/cooling, and water.
These are fixed costs, meaning they should be about the same each month. We also must consider how much
maintenance will cost. We must maintain the look of the catering hall. These costs will include problems that
may arise, maintenance of the grounds/hall, and cleaning supplies. Finally, the price of the land and taxes need
to be taken into account. Land is taxed pretty heavily and we need to take this into account as well as payments
towards the purchase of the property.
2. What is/are your revenue source(s)? How/why does this happen? (3)
Our revenue comes from renting out banquet rooms for large celebrations such as weddings, graduations, and
birthdays. Our facility focuses only on on-site catering in order to keep our costs low and maximize our profits.
Apart from hosting large events, which take place mostly on the weekends, we also have our catering hall
available during the week for smaller events such as company meetings or presentations. Our catering hall
charges a fixed amount per person based on the number of people present, the menu chosen, and the event.
Larger and more important events such as weddings justify a higher price than a quarterly company meeting.
3. What are 3 liabilities that contribute to your profit? Brief discuss. (9) 2-3 lines
Liabilities are responsibilities and amounts that the business owes. Three important liabilities that contribute to
our profit are general liability insurance, business vehicle insurance and food costs. Accidents happen all the
time at any business therefore having a general-liability-insurance is a must in order to be covered in any type
of accident. For instance, purchasing a business owners policy that offers general liability insurance coverage
with property insurance is the best decision. Another liability of our business is the vehicle insurance. Big
business and companies provide vehicles for any type of transportation needed. This must be covered for safety

purposes just like the business property. A third important liability is the amount we owe to our food distributors
and providers. We order food weekly or whenever is needed. Therefore, considering food costs is another
liability because we want to be on top of our balances and bills; making sure we are on time with our payments.
4. What 5 GAAP principles do you see as very important to follow? (Provide brief description and why. (10)
The Generating Accepted Accounting Principles are accounting rules used to prepare and standardize the
reporting of financial statements, such as balance sheets, income statements and cash flow statements, for
publicly trade companies and many private companies in the U.S, issued by the Financial Accounting Standard
Board.
Five important principles of GAAP includes:
1) Economic Entity Assumption: The accountant keeps all the business transactions separate from the business
owners personal transactions. Both proprietorship and its owner and considered to be on entity; in legal
purposes, but separate for accounting purposes.
2) Monetary Unit Assumption: Economic activity is measured and recorded in the U.S dollars, considering
that the dollar purchasing power has not changed over time.
3) Time Period Assumption: This principle assumes that it is possible to report ongoing activities of a business
in a short period of time or time intervals.
4) Cost Principle: This principle refers to the amount spent when an item was purchased. These amounts are
shown in the financial statements for evidence, historical purposes, and backup transactions.
5) Full Disclosure Principle: Certain information is important to investors or lenders when using financial
statements. Therefore, all information should be disclosed within the statement or in the notes to the statement;
usually displayed in the footnotes.
GAAP makes a companys financials comparable and understandable so that investors, creditors and others can
make rational investment, credit, and other financial decisions. The information provided must be relevant,
reliable, comparable, and consistent. Therefore, it is important to know GAAP in order to report finances of a
company or government entity. Without it, companies would be free to decide for themselves what financial
information to report and how to report it.
6. Identify 3 specific financial records that are important in Purchasing, Stores, and Food Production and
provide a brief description of each. (12)
Purchasing:
1) Purchase orders- Written requests to a vendor indicating types, quantities and agreed prices for products
or services.
2) Invoices- A list of goods shipped or delivered. Includes prices and service charges.
3) Requisitions- Form used to request desired products including food and supplies. Generally this form is
made by an individual department and is then submitted to the purchasing department.
Stores:
1) Requisition or storeroom issue records- Document generated by storeroom personnel to notify the
purchasing department of items needed to be ordered, the quantity and the timeframe.
2) Perpetual inventory- A running record of the balance on hand for each item of goods in a storeroom.
3) Physical inventory- an actual account of items in all storage areas.
Food Production:
1) Standardize recipes- A recipe that has been tested and adapted for use by a given food service operation
and was found to produce good results when followed exactly as instructed.
2) Production schedule- The timetable for the use of resources and processes required by a business to
produce goods or provide services. Used to communicate production demand and expectations to the
production staff.

3) Forecasts and tallies- The basis for estimating in advance the quantities of menu items to be prepared
and foods to be purchased from the storerooms.
7. Briefly discuss 2 ratios that are used in foodservice. One ratio should indicated productivity and another
profitability. Provide an example of each (in numbers). (10)
Profitability Ratio:
Food cost per patient = food cost/ number of patients

Productivity Ratio:
Meals per labor hour= number meals served/ number labor hours

8. . Problems (9)
Food cost: $5722. Sales 18,900. What is the food cost percentage?
Food cost percentage = food cost/ sales price x 100
Fcp= $5722/$18900 x 100
Fcp= 30%
Menu item cost: $1.35. Selling price of an item: $4.00. What is the food cost percentage for the menu
item?
Fcp= $1.35/$4.00 x 100
Fcp= 34%
If a restaurant hopes to have a food cost percentage of 35%, what would the menu price be if the food
cost is 5.25? (Be certain to include unproductive costs and make sure your answer is rounded up to the
nearest reasonable amount.)
$5.25 x 1.1 (to account for unproductive costs) = $5.78
35%= 5.78/menu cost x 100

menu cost= $16.51

9. What do you see as the 3 top factors to consider when analyzing efficiency of your foodservice? Describe
each and provide at least 3 reasons why.
There are many different way to measure the productivity our establishment, but the top 3 factors we consider
when analyzing our efficiency are Efficiency %, motion and tie studies and net profit.
Efficiency % = Earned (standard) hours/Actual (worked) hours x 100 and what this number tells us what
percent of the time an employee is actually doing work and the goal is to have a number as high as possible. A
low number means we are paying an employee for time they are not working and we obviously want to avoid
that as best possible, although in foodservice it is sometimes hard to, because of uneven workloads through a
normal day. Regardless, we can compare the efficiency of our employees to industry standards and from one
employee to another to evaluate how well an individual is doing and how we are doing as a whole.
A motion and time study helps us develop the preferred system and method by which a job is done, standardizes
it, determines the time required to perform the task, and assists in training the worked in the preferred method.
Using a motion and time study we can avoid efficiency problems to begin with by having a system and method
for each job to get done from the beginning and making sure we are implementing it correctly. Once in place we
can use the efficiency % to evaluate how employees are handling it.
Finally, the most important number in our whole business is net profit. If we are not making a profit or too low,
then we are definitely not being efficient and need to reevaluate our whole system. The problem may be in our
costs.For example wasting too much food because of poor purchasing decisions, or having to many employees
when a smaller amount would suffice. The problem could also be revenue, we may not be advertising enough to
book all of our times, or perhaps the dcor and atmosphere we create is not reflected by the prices we are
charging. Whatever the reason may be, if our net profits are low or non-existent then we know there is an
efficiency problem somewhere down the line and need to work quickly to solve it.
10. Are budgets good? How do you plan a budget? What does one need to consider when planning
an operating budget? Discuss and include at least 5 factors in this budget. (15) Capital budget? 2 factors (4)
Yes, budgeting is good and has more advantages than disadvantages. A budget is planned by managing
accounting, and control. Control prevents present and future deviation from plans and does much to stimulate an
employee to maintain the standards of the food service director. It also ensures measuring quantity of output,
quality of the finished product, food and labor costs, and the efficient use of workers time.
When planning an operating budget, one must consider documented data on costs including food, labor, energy,
supplies, and overhead expenses. An operating budget also includes the statistics budget, which is an estimate of
the volume of sales in our catering company. Another factor to consider is the revenue budget, which is a
projection of the expected/anticipated income for the financial time period. Three other factors that are included
in an operating budget are manufacturing costs, selling expenses, and sales budget.
When planning a capital budget, one must consider estimates of the costs of capital outlays or expenditures and
their financing. A factor to consider with this type of budget is the dollar value because it defines the items
addressed. Another factor to consider is the availability of funds because in order to have an estimate on
financing and spending, you need to be able to have an idea of where the company stands.
11. How did your group function? (6)
Opinions and thoughts by each member of the team.

Kim- Our group functioned well as a whole. We evenly divided the questions amongst ourselves and worked on
them. We communicated primarily through email and set a date by which to have completed the problems.
Overall I would say that we worked successfully as a group.
Jessica- Our group was organized and functioned efficiently through communicating and careful planning.
Hayley- I think everyone worked well in our group. We divided the work amongst the members of the group but
were available to our other group members in case we had any questions about the part we had to do. Once we
all completed our parts separately we had a plan on how to edit and review the project as a whole and organize
it all together.
Ivonnet- Our group was well organized and we assigned questions to all our group members. We kept in touch
through emails and text messages to organize the work outside school. In this way, we were able to finish on
time and go over it just in case of any change. Overall, we did a good and organized group work.
Emmanuel: Our group worked well together and we knew what everyone was doing right away. There were no
problems and any question anyone had were quickly addressed by the group.