Assume a restaurants sales are set at 100 variable costs tot

Assume a restaurant\'s sales are set at 100%, variable costs total 75% of sales revenue and all known costs are $98,000. Using the bottom-up approach, determine the sales revenue.

Solution

The bottom-up approach leverages the fact that we’re more likely to be able to forecast the company’s expenses more accurately than forecasting sales. This is because virtually all of the company’s expenses are either known or easily researchable.

On The basis of Expenses, we calculate sales revenue

Expenses = 98000
Cost = 75% of Sales Revenue

Sales Revenue = Cost/75%
Sales Revenue = 98000/75%
Sales Revenue = $ 130,666.67