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My Professor and ALot of Accounting people couldnt solve this problem!!! Are U a genius!!!! I am curious, is it a hard question! I have 2 solutions for This Question, but I have no idea which one is right! Can you help!

Goals/Action plan:
In developing the action plan for next year, the general manager first considered the potential for expansion into the catering business. After meeting with a focus group of interested customers and discussing operations with other local catering businesses a first year sales potential of $20,000 seemed reasonable. The General Manager estimated that food costs could be held to 40% of sales and payroll plus benefit costs to 30% of sales. IN addition, a delivery van would need to be rented for $2,400 per year plus insurance and license of $1,000 annually.
The general manager then met with the other managers to formulate goals for the next year. Consensus was reached on the following goals:
1- Increase regular food sales 7%
2- Increase beverage sales 5%
3- Reduce food costs to 43% of food sales.
4- Reduce beverage costs to 34% of beverages sales.
5- keep payroll costs at 28% of food plus beverage sales.
6- keep benefit costs at 4% of food plus beverages sales
7- keep at the same DOLLAR amount:
- Other income
- Administrative and general
- Rent
- Property taxes
- Property insurance
- Depreciation

8- Increase all remaining costs 5%.

- Questions!!!
1) Develop a schedule to determine whether or not it will be profitable to enter the catering business.

2) Develop a plan or budget for next year using the reporting format number 1 in the bottom of the questions bellow, and the goals stated ABOVE. If u decide to enter the catering business from your analysis in Question 1, add separate lines to format number 1 for the sales and cost of catering.
3) Certain actions will be necessary to achieve each of the goals stated in this budget. For each of the following goals, suggest three actions that may help it :

A- Increase regular food sales
B- Increase beverage sales
C- Reduce food cost percentage
D- Reduce beverage cost percentage
E- Hold payroll cost percentage constant

Format Number 1
Income statement

For the year ended December 31,1993

With comparison industry medians

Middletown Café
December 31
Dorllar /////// Percent ///////// Industry Median percent

////// THESE ARE TO SEPARATE THE DOLLAR ////from the Percent/////From the MEdiant perecent.

Sales
Food ///$1,003,188 // 71.4% //// 80.4%
Beverage /// 402,711 //// 28.6% //// 20.0

Total sales ////1,405,899////100.0 ////100.0
Cost of sales
Food /////440,527 ////// 43.9 ///// 34.0
Beverage /////140,577 /////34.9 ///// 27.7
Total cost of sales/// 581,104 ///// 41.3////// 32.8
GROSS PROFIT //////824,795 ///// 58.7 ///// 67.2

Other income//// 17,186 ///// 1.2 //// 0 .3
Total Income///// 841,981 //// 59.9 ///// 68.6

Controllable Expenses:

Payroll ////392,796 ///// 27.9//// 29.3
Employee Benefits /// 56,488 ///// 4.0/// 5.0
Direct Operating Expenses///// 65,511 /// 4.7 ///// 5.5
Music and Entertainment //// 1,778//// 0.1 //// 0.1
Advertising and Promotion ////// 24, 768 ///// 1.8 ////// 2.0
Utilities /////32,213 //// 2.3 //// 3.0
Administrative and General ///// 76,341///// 5.4 ///// 4.1
Repairs and Maintenance////// 21,228///// 1.5 //// 1.7
ToTAL Controllable expenses ///// 671,123 ////// 47.7//// 53.0
INCOME before OCCUPANCY COSTS///170,858 //// 12.2///// 14.7

Occupancy Costs:
Rent //// 73,107//// 5.2 //// 5.4
Property Taxes /////6,810//// 0.5 //// 0.5
Other Taxes __0__ //// __0__ //// 0.1
Property Insurance ///// 5,375 //// 0.4 //// 0.9
TOTAL OCCUPANCY COST /// 85,292///// 6.1 //// 6.8
Income before Interest and Depreciation ////85,566 //// 6.1/// 7.9
Interest /// —0—//// –0— /// 0.4
Depreciation /////56,190//// 4.0 /// 2.3
Income be4 Income Taxes /// $29.376 /// 2.1% // 3.1%