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3) Let's take the following information: You start a lemonade stand. You estimate that you will make and sell 2,000 glasses of lemonade during the
3) Let's take the following information: You start a lemonade stand. You estimate that you will make and sell 2,000 glasses of lemonade during the upcoming summer. You sell the lemonades for $3.50 each. You have determined that you have the following costs associated with each glass of lemonade made and sold (aka "unit cost" aka "cost per unit"): 1. Lemons, cups and sugar$1.00 2. Labor (making lemonades) .30 3. Sales commission .20 Also, you have the determined the following totals for the entire season: 4. Depreciation on blender $ 300 5. Blender maintenance 700 6. Rent on lemonade stand 1,000 7. Advertising 500 8. Accountant and other 500 Some not-so-simple questions: a) There are 8 things listed up there. Tell me: What do numbers 1 & 2 have in common? How are 1 & 2 different than 3? What do numbers 1, 2, 4, 5, & 6 have in common? What do numbers 1, 2 & 3 have in common? What do numbers 4, 5, 6, 7 & 8 have in common? How are 1, 2 & 3 different than 4, 5, 6, 7 & 8? How are numbers 4, 5 & 6 different than numbers 7 & 8? b) What is your expected total sales revenue for the period? How did you get this? Are you sure? c) You appear on Shark Tank. Mr. Wonderful asks "How much does it cost you to make a glass of lemonade?" Explain how you got your answer. d) Okay ... let's find your Cost of Good Sold. Your thinking 2,000 units (glasses). Each one costs you whatever you got in (c) above. Multiply... That's how much? e) Subtract d) from b) (compute gross profit or gross margin) .... That's how much? f) Okay ... now there are THREE other operating expenses. Figure out what they are. Subtract that from your gross profit. g) Are we expecting to make money during the upcoming season? In other words, what's the "budgeted profit or loss"? (f) above
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