hw3fsae.doc - Jaegook Lee G26205244 Third Homework A...

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Jaegook Lee G26205244 Third Homework A separate file includes the financial statements and part of MD&A for Potbelly Corporation. Use Potbelly’s financial statements to answer question 1 and 2. Cost of sales consists of the cost of the food it serves. 1. a. Calculate the cost of goods sold to revenue ratio and the labor and related expenses to revenue ratio for 2015 and 2016. CoGS / Rev Labor and related expense / Rev 2015 (105,614/372,849)=28.3% (106,628/372,849)=28.6% 2016 (111,026/407,131)=27.27% (117,838/407,131)=28.9% b. In its Management Discussion and Analysis discussion, Potbelly discusses the effect of state-mandated minimum wages. What ratio in the common size income statement changed as a result of that change and did it increase or decrease? Is the overall change in that common size income statement ratio (as shown in part a) in the same direction as the change due to the change in minimum wages? It is possible that other factors shifted the ratio in the other direction. As a result of statutory wage change, the labor and related expense went up, so Labor and related expense to revenue ratio increased as well. However, as they disclosed in the note,
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