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A farm has produced fruit for more than two decades and sells it to supermarkets. This business leaves a net margin of around 0.27. In
A farm has produced fruit for more than two decades and sells it to supermarkets. This business leaves a net margin of around 0.27. In 2021, the owner began to produce and market natural smoothies with the fruits of the farm. During this year, she sold a total of 55,000 shakes at $6.5 a bottle (1 liter). However, she returned 500 bottles for quality problems and she gave discounts totaling $2,500.
To produce her, she paid $5,000 in basic services, $18,000 in labor, $94,500 in supplies and equipment. She paid $31,000 in vendor salaries, $16,000 in advertising, $18,000 in selling expenses. She paid herself $20,500 to run the business, she spent $1,500 on office supplies, and $3,600 in interest on loans she maintains. She also paid $2,500 in insurance and $17,000 in rent for the office. Ultimately, she paid $10,725 in taxes.
1. Should she go into producing and selling fruit, selling smoothies, or both? To answer this question, use the concepts and tools that we have seen in class. Limit your answer to two pages between calculations and a short comment (maximum 5-6 lines). I will not review what is over the page limit. (75 points)
2. In order to get the full picture of the financial health of this farm, what other aspects that have not been included in the case study information would need to be analysed? Include concepts and formulas (just the formulas, you don't have to do any calculations for this section). (25 points)
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