After taking business classes, Jake, an avid dog-lover, decided to start selling unique pet supplies at trade shows. He has two products:

Product 1: "Launch-it"- a tennis ball thrower that will sell for $10.

Product 2: "Treat-time"- an automatic treat dispenser that releases a treat when the dog places his paw on the pedal. The treat dispenser will sell for $30.

Costs: Jake has hired an employee to work the trade show booths. The work contract is $1,000 per month plus a commission equal to 15% of revenue. Jake will also spend $500 per month on trade-show entry fees. Jake is purchasing the products from a supplier in Mexico. Launch-its cost $1 each; Treat-times cost $7 each. Shipping and handling on the Launch-its will cost $3 each; Shipping and handling on the Treat-times, which are heavier, will cost $11 each. The shipping and handling costs will be paid by Jake, not the customer.

Assume Jake expects to sell 1,000 Launch-its and 750 Treat-times during his first month of operations (June).

Jake's financial goal is to earn an operating income of $8,000 per month. He believes volume may grow at a rate of 5% a month.

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1) Complete the assumptions (blue box) based on the data about Jake's business. Identify and list all variable costs separately and all fixed costs separately before finding the total for each type of cost.

2) Complete the Product Analysis (yellow boxes) assuming Jake ONLY sells either Product #1 (Launch-its) OR Product #2 (Treat -times).

Check figures: B/E Product #1 = 333 units; B/E Product #2= 200 units

3) Complete the pro forma CM Income Statement for the month of June (green box). HINT: On product line income statements such as this, the fixed costs are only listed in the total column. Make sure you also show the totals for all other line items. Finally, calculate the overall WACM% for the company.

Check figure: Operating income = $8,625 WACM% = 31%

4) Calculate the weighted average contribution margin (WACM) per unit (in orange box).

Check figure: WACM/unit = $5.79

5) Use the WACM/unit to calculate the TOTAL number of units needed to breakeven (TOTAL column in the first gray box). THEN, calculate the number of EACH type of product needed to breakeven. Finally, calculate the sales revenue associated with this volume for EACH product, and then the sales revenue to breakeven in total.

Check figures: B/E Product #1 = 148; B/E Product #2= 111

6) Use the WACM/unit to calculate the total number of units needed to achieve Jake's target profit (TOTAL column in the second gray box). THEN, calculate the number of EACH type of product needed to achieve the target profit. Finally, calculate sales revenue associated with this volume for EACH product, and then the sales revenue in total.

Check figures: B/E Product #1 =938; B/E Product #2= 704

7) Calculate the MOS using June sales as the expected sales (purple box). Calculate the MOS in terms of sales revenue and as a percentage. Also calculate the current profit multiplier(profit sensitivity -round to the nearest 2 decimal places) and use it to determine the expected percentage change in operating income stemming from an expected change in sales volume.

Check figures: MOS%= 85%; Profit multiplier= 1.17

1.

	ASSUMPTIONS
	Product #1:	Launch-it
	Sales price per unit
	Variable costs per unit:
	COGS
	Shipping and Handling
	Commissions
	Total variable cost per unit
	Monthly volume
	Product #2:	Treat-time
	Sales price per unit
	Variable costs per unit:
	COGS
	Shipping and handling
	Commission
	Total variable cost per unit
	Monthly volume
	Fixed costs per month:
	Salaries
	Entry Fees
	Total fixed costs per month
	Target profit per month
	Expected change in volume (%)