1. Classify each cost as fixed or variable (see below) 2. Calculate the annual cost for cost description (see below) Using the cost and sales data below, prepare Income Statements (to the 3. right) based on the criterion provided. ALL YELLOW CELLS REQURE DATA TO BE INPUT (START BELOW) Classify Annual GENERAL BUSINESS COSTS Cost Cost $ 6,000 $ 1,800 Rent Monthly 500 FIXED Utilities Monthly 150 FIXED Insurance Annually $ 800 FIXED 800 Water Quarterly s 150 FIXED 600 Coffee Making Equipment - Depreciation (based on cost of $12,000 and a 5 year life and zero salvage value) Annually $ 2,400 $ 1,200 FIXED Table and Chair Rental Monthly 100 FIXED Laptop and Credit Card Scanner - Depreciation (based on cost of $4,800 with a 4 year useful life and zero salvage value) Barrista Salary Annually $ 1,200 $ 25,000 $ 1,800 FIXED Annually 25,000 FIXED 150 FIXED Other Miscellaneous Costs Monthly COST OF CUP OF COFFEE Coffee Grounds er cup 0.75 VARIABLE Sugar/Cream/Flavoring per cup 0.05 VARIABLE Paper Cup and Top per cup 0.12 VARIABLE Heat Protection Sleeve per cup 0.05 VARIABLE Plastic Stirrer per cup 0.03 VARIABLE SALES PRICE OF COFFEE per cup 4.00 INCOME STATEMENT SLEIVINIO CVIVOE I (COMPARED TO BASE (COMPARED TO BASE (COMPARED TO BASE SCENARIO) BREAK EVEN POINT BASE SCENARIO SCENARIO) SCENARIO) What Happens to Net Income if I Use What Happens to Net Income if I Spend $5,000 on Advertising Grounds Costing $1.25 SCENARO AND BRING Premium Kona Coffee YOU CREATE A Annual Target Net Income of $60,000 and Cups of Coffee per cup and Cups of IT TO THE At Break Even Point Increases 10%? Coffee Increases 8%? DISCUSSION GROUP Sales Revenue Variable Costs Contribution Margin Fixed Costs 40,800 40,800 Net Income (40,800) $ (40,800) S BREAK EVEN POINT CALCULATION BASED ON THE SCENARIO ABOVE -Cups of Coffee -Sales Revenue CM Ratio: -Dollars -Ratio