Vitoro restaurant made a sale of One hundred thousand naira (N100,000). The amount spent on ingredient for preparing the meal was Twenty-five thousand naira...
Question 1 Report
Vitoro restaurant made a sale of One hundred thousand naira (N100,000). The amount spent on ingredient for preparing the meal was Twenty-five thousand naira (N25,000), members of staff were paid Forty thousand naira (N40,000) and other expenses such as rent and utility bills was Fifteen thousand naira (15,000).
Use this information to answer questions 4(a),(b) and (c).
(a) Identify the overhead cost and labour cost.
(b) Calculate net profit.
(c) Calculate the percentage net profit.
Answer Details
First set out the given figures. Sales (income) = N100,000. Cost of ingredients (food cost) = N25,000. Wages paid to staff (labour) = N40,000. Rent and utility bills (overhead) = N15,000.
(a) Overhead cost and labour cost
- Overhead cost = rent and utility bills = N15,000. Overheads are the running expenses of the business that are not the food itself or direct wages.
- Labour cost = wages paid to members of staff = N40,000.
(b) Net profit
Net profit is what remains from sales after all costs have been deducted.
Total costs = ingredients + labour + overhead = N25,000 + N40,000 + N15,000 = N80,000.
\[ \text{Net profit} = \text{Sales} - \text{Total costs} = 100{,}000 - 80{,}000 = N20{,}000 \]
(c) Percentage net profit
This expresses the net profit as a percentage of sales.
\[ \text{Percentage net profit} = \frac{\text{Net profit}}{\text{Sales}} \times 100 = \frac{20{,}000}{100{,}000} \times 100 = 20\% \]
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