Question

Please help me to solve this problem

assumptions: 25 days . 8 hours (no wages) and 8 hours pay

INTRODUCTION Snowie, owned by Carl and Gordon Rupp, is a company that provides training, equipment, and supplies for operating a shaved ice business. Shaved ice is an ice-based refreshment made by shaving a block of ice into a fluffy, snow-like ice. The product is served in cups with flavored syrups added to the ice. Due to its fine texture, shaved ice absorbs the syrup, making each bite flavorful. Snowie does not sell franchises. It sells a wide array of equipment and supplies, including ice shavers, kiosks, carts, buses, syrups, cups, and other supplies to independent operators. PART 1: COST-VOLUME-PROFIT ANALYSIS FOR A SNOWIE KIOSK REQUIREMENTS 1. Specify your assumptions about the following items: a. Number of days you anticipate opening the Snowie kiosk per month b. Number of hours you will work (no wages required) per day c. Number of hours you will pay an employee to work in the Snowie kiosk per day 2. Is the cost of syrup a variable or fixed cost with respect to the number of Snowies sold? What is the cost of syrup per Snowie? (Use four decimal places in your response and all calculations for this question.) 3. Is the cost of the worker attending the kiosk a variable or fixed cost with respect to the number of Snowies sold? What is the cost of the worker's wages per day and per month? 4. What is the total variable cost per Snowie (per cup)? 5. What is the total fixed cost per month to operate the Snowie business? 6. Calculate the number of Snowies that you need to sell cach month to break even. 7. How many snow cones must be sold to achieve an operating profit of US$2,000.00 per month (before tax)? 8. Think about the break even and target profit quantities you just calculated. Do you think these quantities are realistic? Discuss and support your answer. Assume that you are evaluating whether to start a Snowiel business. You could operate a shaved ice kiosk at fairs, downtown areas, and other outdoor events. The kiosk is portable with wheels and a hitch. It has plenty of storage place, work arca, electrical outlets, lighting, and a water system. The flavored shaved ice, a "Snowie," is normally offered in three sizes. For this case, we are going to assume that only one size is offered—the large size, 20 oz. The large Snowie sells for US$4.00. See Table for a list of all costs related to a large size Snowie. In this case, use straight-line depreciation with a five- year life and salvage values of zero for both the ice shavers and the flavor station. All monetary amounts in this case are expressed in U.S. dollars.

Answer 1

Ans 1a. 25 days per month

Ans 1b. 8 hours/day (no wages required)

Ans 1c. 8 hours/day (wages required)

And 2. Cost of syrup would be a variable cost per snowie, since the more number of snowie sold more would be the consumption and cost of syrup.

Cost of syrup per snowie = $4.25/28 = $0.1518

Ans 3. The cost of worker is fixed cost w.r.t. per snowie sold. Since irrepective of snowies sold we would need to pay the worker for the number of hours he/she has been hired for each day.

Worker's wages cost per day: $10.00/hr x 8hr/day = $80 per day

Worker's wages per month (Assumed we will hire worker for as many no days as kiosk is run): $80/day x 25 days per month = $2000

Ans 4. Total variable cost per snowie is computed below:

Variable Cost List		$
	Ice per snowie	0.2000
	Spoon Straw	0.0200
	Stryofoam Cup	0.0800
	Napkin (0.01 x 2)	0.0200
	Syrup per snowie ($4.25/28)	0.1518
Total Variable cost per snowie cup		0.4718

Ans 5. Total fixed cost per month to operate Snowie is listed below:

Fixed Cost per month		$
	Worker ($80/day x 25 days)	2000
	Event Registration fee ($25/day x 25 days)	625
	Electricity, Insurance, Maintenance & permit	250
	Kiosk rental	650
	Ice shaver Depreciation ($3180/5yr/12 month)	53
	Flavour station Depreciation ($1080/5yr/12 month)	18
Total Fixed cost per month		3596

Ans 6.

Selling Price per snowie		4
Variable Cost per Snowie		0.4718
Contribution per Snowie		3.5282
Total Fixed cost per month		3596
Contribution per Snowie		3.5282
Break even unit		1019

Ans 7.

Profit required per month		2000
Fixed cost per month		3596
Hence Contribution required per month		5596
Contribution per Snowie		3.5282
Hence units to be sold to get $2000 profit per month		1586

Ans 8. The figures look realistic on the basis of snowies sold each hour

		Break even	$2000 profit
Desired units to be sold		1019	1586
No of days operated in a month		25	25
Desired No of snowies sold each day		41	63
No of hours worked each day		8	8
Desired No of snowies sold each hour		5.1	7.9