Your selling three different kinds of milkshakes (whole milk,almond milk and coconut milk) that are all the same size, 20ounces. They will sell for $8, $9 and $10respectively. Customers can choose from a variety of 10different flavorings (vanilla, chocolate, salted caramel, hazelnut,strawberry, marionberry, blueberry, toffee, blue cheese andhorseradish). Following is the cost of materials foreach of the different kinds of milkshakes:
Ingredients Whole Almond Coconut
Milk $ 1.30 $ 1.65 $ 1.75
Cream ($25 for 1 gallon = 128oz.) (need3 oz. for all kinds of shakes)
Tillamook Vanilla Ice Cream ($30 for 500oz.) (need 10 oz. for all kinds ofshakes)
Pure Cane Sugar ($12 for a 10 lb. bag=20 cups) (need½ cup for all kinds of shakes)
Flavors $0.45per shake for all kinds of shakes
Cups (1,000 20 oz. cups @ a cost of$500)
Employees
You will need to hire two part-time employees whom you will pay$1,200 per month (each) plus additional taxes of $100 per month(each).
Other costs
Food cart rental - $500 per month plus 5% of gross sales
Improvements to food cart - $15,000 (to be depreciated over 10years on the straight-line basis)
Cleaning and supplies - $50 per month
Equipment - $ 2,500 (depreciated over 5 years on thestraight-line basis with no salvage value)
Annual insurance - $1,200
Annual marketing expense - $ 2,000
Key assumptions
Udderly Delish is open year-round from 2 p.m. to 8 p.m. everyday (except 7 days of holiday)
The income tax rate is 25%
Customers can only choose one flavor per shake.
The projected sales mix is 50% (whole), 20% (almond) and 30%(coconut).
Calculate the annual break-even point (in milkshakes).
How many coconut milkshakes need to be sold to reach the totalbreak-even point?
How many total milkshakes will need to be sold to make anafter-tax profit of $50,000?
Assuming a total of 15,000 milkshakes are sold, what is theafter-tax profit? Please draft a full contributionmargin income statement.
If you had the chance to purchase the food cart, instead ofrenting it, for $ 75,000 (depreciated over 5 years on thestraight-line basis with no salvage value), how many milkshakeswould you need to sell per year to make this option MORE profitablethan the option to rent it?
Your selling three different kinds of milkshakes (whole milk,almond milk and coconut milk) that are all the same size, 20ounces. They will sell for $8, $9 and $10respectively. Customers can choose from a variety of 10different flavorings (vanilla, chocolate, salted caramel, hazelnut,strawberry, marionberry, blueberry, toffee, blue cheese andhorseradish). Following is the cost of materials foreach of the different kinds of milkshakes:
Ingredients Whole Almond Coconut
Milk $ 1.30 $ 1.65 $ 1.75
Cream ($25 for 1 gallon = 128oz.) (need3 oz. for all kinds of shakes)
Tillamook Vanilla Ice Cream ($30 for 500oz.) (need 10 oz. for all kinds ofshakes)
Pure Cane Sugar ($12 for a 10 lb. bag=20 cups) (need½ cup for all kinds of shakes)
Flavors $0.45per shake for all kinds of shakes
Cups (1,000 20 oz. cups @ a cost of$500)
Employees
You will need to hire two part-time employees whom you will pay$1,200 per month (each) plus additional taxes of $100 per month(each).
Other costs
Food cart rental - $500 per month plus 5% of gross sales
Improvements to food cart - $15,000 (to be depreciated over 10years on the straight-line basis)
Cleaning and supplies - $50 per month
Equipment - $ 2,500 (depreciated over 5 years on thestraight-line basis with no salvage value)
Annual insurance - $1,200
Annual marketing expense - $ 2,000
Key assumptions
Udderly Delish is open year-round from 2 p.m. to 8 p.m. everyday (except 7 days of holiday)
The income tax rate is 25%
Customers can only choose one flavor per shake.
The projected sales mix is 50% (whole), 20% (almond) and 30%(coconut).
Calculate the annual break-even point (in milkshakes).
How many coconut milkshakes need to be sold to reach the totalbreak-even point?
How many total milkshakes will need to be sold to make anafter-tax profit of $50,000?
Assuming a total of 15,000 milkshakes are sold, what is theafter-tax profit? Please draft a full contributionmargin income statement.
If you had the chance to purchase the food cart, instead ofrenting it, for $ 75,000 (depreciated over 5 years on thestraight-line basis with no salvage value), how many milkshakeswould you need to sell per year to make this option MORE profitablethan the option to rent it?
