Question

The present cost to Lil's Restaurant for one a la carte steak is $3.20. This is 40% of the menu sales price.
a. What is the present sales price?
	Steak cost at time 0	$
	Food cost %
	Steak price at time 0
b. At an annual inflation rate of 5 percent, what is this steak likely to cost one year from today?
	Steak cost at time 0
	Annual inflation rate
	Cost at time 1
c. Using the cost calculated in (b) above, what should the menu sales price be for this item in one year if the cost percent at the time is to be 38 percent?
	Steak cost at time 1
	Food cost %
	Steak price at time 1
d. If you were a banquet manager planning a function six months from now and planning to use this item, what unit cost would you plan for?
	Steak cost at time 0
	Annual inflation rate
	Steak cost at time .5
e. The banquet manager in (d) above has already calculated that the other items included in this banquet menu will have increased in cost in six months from $2.00 to $2.11. What should the sales price per person be for this banquet if the desired cost percentage is 40 percent?
	Steak cost at time .5
	Other costs at time .5
	Total cost at time .5
	Food cost %
	Total price at time .5

Answer 1

a) Stock cost at time 0 = $3.20

Food cost % = 40%

Steak price at time 0 = $3.20/40% = $8.00

b) Steak cost at time 0 = $3.20

Annual inflation rate = 5%

Cost at time 1 = $3.20(1.05) = $3.36

c) Steak cost at time 1 = $3.36

Food cost % = 38%

Steak price at time 1 = $3.36/38% = $8.84

d) Steak cost at time 0 = $3.20

Annual inflation rate = 5%

Steak cost at time .5 (six months from now) = $3.20*[1+(5%/2)] = $3.20*(1.025) = $3.28

e) Steak cost at time .5 = $3.28

Other costs at time .5 = $2.11

Total cost at time .5 = $3.28+$2.11 = $5.39

Food cost % = 40%

Total Price at time .5 = $5.39/40% = $13.47