Olivia Schnall operates a snow cone cart that she takes to outdoor festivals on the weekends. She makes the snow cones from ice shavings topped with flavored sugar syrup. She currently sells each snow cone for $3.00. The variable cost for each snow cone is $1.00 and the monthly fixed costs for operating the snow cone cart are $1,000. Olivia is evaluating the impact of changing the snow cone selling price and would like to earn at least $800 of operating income (profit) per month. Next is a screenshot from the Excel what-if analysis that Olivia prepared to evaluate the impact of possible price changes on her monthly profit.

Using the what-if analysis results, answer the following questions:

1. How many snow cones does Olivia need to sell in a month to break even if the selling price remains at $3.00 per snow cone?
2. How many snow cones does Olivia need to sell to break even if she increases the selling price to $3.50 per snow cone?
3. How many snow cones does Olivia need to sell to reach her monthly target profit if the selling price remains at $3.00 per snow cone?
4. How many snow cones does Olivia need to sell to reach her monthly target profit if she increases the selling price to $4.00 per snow cone?
5. What would Olivia’s monthly profit be if she increases the selling price to $3.50 and sells 750 snow cones?

Transcribed Image Text:

1 2 A Sales price per unit Less: Variable cost per unit 3 Contribution margin per unit 4 X Volume 5 Total contribution margin 6 Less: Fixed expenses 7 Operating income 8 12 13 14 $ $ $ 9 10 Monthly target profit (minimum) $ 11 B 3.00 1.00 $1,500.00 1,000.00 500.00 2.00 750 799.00 D $ E F H Profit Outcome at Different Sales Prices and Volumes 3.00 $ 3.25 $ 3.50 $ 3.75 $ 4.00 PS 4.25 500 $ 900 $ $ 1,025.00 $ 1,250.00 $ 1,700.00 $ 1,925.00 $ 912.50 $ 1,125.00 800.00 $ 1,475.00 850 $ 700.00 $ 1,337.50 $ 1,550.00 $ 1,762.50 800 $ 600.00 S 800.00 $ 1,000.00 $1,200.00 $1,400.00 $ 1,600.00 750 $ 500.00 $ 687.50 $ 875.00 $ 1,062.50 $ 1,250.00 $ 1,437.50 700 $ 400.00 $575.00 $ 750.00 $ 925.00 $ 1,100.00 $ 1,275.00 650 300.00 $ 462.50 $ 625.00 $ 787.50 $ 950.00 $ 1,112.50 600 $ 200.00 $ 350.00 S 500.00 $ 650.00 S 800.00 $ 950.00 100.00 $ 237.50 S 375.00 $ 512.50 $ 650.00 $ 787.50 $ 125.00 $ 250.00 $ 375.00 $ 500.00 $ 625.00 125.00 $ 237.50 $ $ 550 500 $ 450 $ (100.00) $ 12.50 400 $ (200.00) $ (100.00) $ 350.00 $ 462.50 300.00 100.00 Ś 200.00 $ 350 $ (300.00) $ (212.50) $ (125.00) $ (37.50) $ 50.00 $ 137.50 K Q