Question

w ww LUD UJ the Sreel WILA YUUF UNSwers WITH YOU JUTSL UNUIUS TURRIC. JUU PDF) to me via D2L Snowies", owned by Carl and Gordon Rupp, is a company that provided 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. Assume that you are evaluating whether to start a Snowie 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 area, 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 the following page 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. In your calculations, 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 Make the above figures dynamic, such that if you can change them the answers will also change. Answers needed: a. What is the contribution margin per snow cone? b. How many snow cones must be sold each month to break even? How many snow cones is that on a per day and per hour basis? If this does not seem reasonable based on your assumptions, adjust your assumptions. c. How many snow cones must be sold to achieve an operating profit of $2000 per month (before tax)? How many snow cones is that on a per day and per hour basis? If this does not seem reasonable based on your assumptions, adjust your assumptions

Answer 1

Assumptions
a. No. of days anticipated opening the snowie kiosk per month	30
b. No. of Hours you will work per day	6
c. No. of hours you will pay an employee to work in the snowie kiosk per day	8
(a) Computation of Contribution p.u
Selling Price p.u	$4.00
Variable Costs p.u :
Ice p.u	$0.20
Spoon straw	$0.02
Styrofoam Cup	$0.08
Napkin	$0.02	=0.01*2
Syrup	$0.15	=4.25/28
Total Variable Costs	$0.47
Contribution margin per snow cone	$3.53
Computation of Fixed Costs
Workers Cost	$2,400.00	=$10*8*30
Event Registration Fees	$750.00	=$25*30
Electricity,Insurance,maintenance,permit costs per month	$250.00
Kiosk rental per month	$650.00
Depreciation of two ice-shavers	$53.00	=3180/5/12
Depreciation of Flavor station	$18.00	=1080/5/12
Total Fixed Costs	$4,121.00
(b) No. of Snow cones to be sold per month to break-even
=Total Fixed cost per month/Contribution p.u
=$4121/$3.53
1168
No. of Cones per Day
=1168/30
39
No. of Cones per Hour
=39/(6+8)
3
(c) No. of Snow cones to be sold per month to have Profit before Tax of $2000
=Total Fixed cost per month + Desired Profit/Contribution p.u
=($4121 + $2000 )/$3.53
1735
No. of Cones per Day
=1735/30
58
No. of Cones per Hour
=58/(6+8)
4