After years working as an internal auditor at a large insurance company. Taylor Kennedy decided to realize the dream of running a business with a young family. There was a strong need to have festly in hours that a small business would provide. The insurance company offered wonderful opportunities for travel and in particular, travel to Asia, where Taylor developed a taste for fine tea the years of contemplating a change. Taylor and Master Tee.com in January 2012 Articipating intowo period Taylor grew worrisome that the Financial results of the first year old not seem to support a sustainable operation (See Exhibit) Master Tea.com is an online operation that provides a premium den delivery service to its members. For $20 per month, members receive a package containing four different blends of which are selected by Taylor through specialized vendors in Anu Each month, the bends of the changes, allowing Tayor to import Asian team to the Canadian market while supporting a stork of small groducers across Asia Tayor conducted extensive research: Tes is one of the most popular drinks in the world and consumption of team in Canada is increasing as consumers are becoming more aware of heath benefits Taylor felt that busy Canadians would appreciate the convenience of ang premium feared to the door and that the $20 monthly fee would be sufficient to cover costs plus provide some income soport a young The business model Taylor set up is fairly simple. Mesters subscribe to the service on the Master Tea.com website Aher completing a form with contact shipping and payment informationer startering their monthly boxes of tea. Recognizing that members may need to suspend deliveries of various mes the website allows for a temporary pause and restart option Members can access a discussion board when they can leave comments about their favourite tiends of tea. The te reordered from is and packaged in Master Tea.com's office space, which Taylor rents from an under Demand was strong enough in the first year with strong initial demand, Taylor needed the four part time staff to assist with running the company. One staff member is responsible for the website and the member accounts. The other three package the tea and send to members being done a targe university, Taylor asily led the four panime positions with students hoping to some money Because of Taylor's experience in internal audit, there were tight controls in every aspect of the operation Despite all that hard work in establishing the network of suppliers and setting up the business. Taylor worried about whether the business will be able to generate enough profit to support the family Competition is tough with premium to shops in many convenientations member counts could increase Taylor believes that Master Tea.com could become profitable. Taylor recolectivity based coming university and wondered this could provide insight into tuming around prolis Taylor spoke to the staff to determine they could provide any insight on the various activities of the business MB) Master Tes.com did not start to generate profits, the business could collapse Required Using a case format prepare a report to Taylor Highghting the surfacing area.com Using the information from Exhibit develop an Income Statement based on activity and conting information and include recommendations as to what Taylor should do totum aprofit Please ignore Tax implications GST corporate and personal Complications of importing Implications of COVD and impact supply chain (une fictional care se pre-COVID Assume that distribution though online piante like Amaron is not available to Master Ten.com Foreign currency translation transactions are reported in Canadian dollar Learning Objectives 1. Apply the concept of activity-based costing in designing the operations assess 2. Demonstrate the usefulness of activity based management in making profitability decision The required is intentionally vague to give students the opportunity to think about the components of the case format Length: 300 to 1,000 wordexcluding calculations which are the only allowed appendice Format accepted: Microsoft Word Google Doc (not so POFU EXHIBIT A MasterTea.com Income Statement (with explanatory notes) For the 12 months ending December 31, 20x2 Sales $77,760 Cost of Goods Sold 31.104 Gross Margin $46,656 Selling and administrative expenses: Shipping $14.720 Marketing (website maintenance, advertising) 2.500 Rent 15,000 General and administration 31.000 Total Selling and administration expenses $63,220 Operating income/(loss) ($16.564) Additional notes: Subscription price is $20 box per month COGS is $8 per box per month COGS only includes the cost of the tea. . Al fixed overhead costs are included within selling and administrative expenses General and administrative expenses includes wages Taylor does not receive a wage salary EXHIBIT B Discussions with staff Shipping expenses are put in a "package and ship tea activity and generate and administrative expenses are split into three activities: "set up member accounts, process pause-and-restart requests and support members". Cost drivers were selected by Taylor and activity rates were determined through discussions with Taylor and the staff by estimating the percentage of time spent on each activity Activity Cost Pool Cost Driver Total Quantity of Cost Activity Rate Driver Package and ship tea Number of boxes 3,888 $3.786 per box shipped Set up member Number of new 150 $5 per member accounts members Process pause and Number of pause and 600 $49.584 per request restart requests restart requests Support members Number of members 150 $3.333 per member After years working as an internal auditor at a large insurance company. Taylor Kennedy decided to realize the dream of running a business with a young family. There was a strong need to have festly in hours that a small business would provide. The insurance company offered wonderful opportunities for travel and in particular, travel to Asia, where Taylor developed a taste for fine tea the years of contemplating a change. Taylor and Master Tee.com in January 2012 Articipating intowo period Taylor grew worrisome that the Financial results of the first year old not seem to support a sustainable operation (See Exhibit) Master Tea.com is an online operation that provides a premium den delivery service to its members. For $20 per month, members receive a package containing four different blends of which are selected by Taylor through specialized vendors in Anu Each month, the bends of the changes, allowing Tayor to import Asian team to the Canadian market while supporting a stork of small groducers across Asia Tayor conducted extensive research: Tes is one of the most popular drinks in the world and consumption of team in Canada is increasing as consumers are becoming more aware of heath benefits Taylor felt that busy Canadians would appreciate the convenience of ang premium feared to the door and that the $20 monthly fee would be sufficient to cover costs plus provide some income soport a young The business model Taylor set up is fairly simple. Mesters subscribe to the service on the Master Tea.com website Aher completing a form with contact shipping and payment informationer startering their monthly boxes of tea. Recognizing that members may need to suspend deliveries of various mes the website allows for a temporary pause and restart option Members can access a discussion board when they can leave comments about their favourite tiends of tea. The te reordered from is and packaged in Master Tea.com's office space, which Taylor rents from an under Demand was strong enough in the first year with strong initial demand, Taylor needed the four part time staff to assist with running the company. One staff member is responsible for the website and the member accounts. The other three package the tea and send to members being done a targe university, Taylor asily led the four panime positions with students hoping to some money Because of Taylor's experience in internal audit, there were tight controls in every aspect of the operation Despite all that hard work in establishing the network of suppliers and setting up the business. Taylor worried about whether the business will be able to generate enough profit to support the family Competition is tough with premium to shops in many convenientations member counts could increase Taylor believes that Master Tea.com could become profitable. Taylor recolectivity based coming university and wondered this could provide insight into tuming around prolis Taylor spoke to the staff to determine they could provide any insight on the various activities of the business MB) Master Tes.com did not start to generate profits, the business could collapse Required Using a case format prepare a report to Taylor Highghting the surfacing area.com Using the information from Exhibit develop an Income Statement based on activity and conting information and include recommendations as to what Taylor should do totum aprofit Please ignore Tax implications GST corporate and personal Complications of importing Implications of COVD and impact supply chain (une fictional care se pre-COVID Assume that distribution though online piante like Amaron is not available to Master Ten.com Foreign currency translation transactions are reported in Canadian dollar Learning Objectives 1. Apply the concept of activity-based costing in designing the operations assess 2. Demonstrate the usefulness of activity based management in making profitability decision The required is intentionally vague to give students the opportunity to think about the components of the case format Length: 300 to 1,000 wordexcluding calculations which are the only allowed appendice Format accepted: Microsoft Word Google Doc (not so POFU EXHIBIT A MasterTea.com Income Statement (with explanatory notes) For the 12 months ending December 31, 20x2 Sales $77,760 Cost of Goods Sold 31.104 Gross Margin $46,656 Selling and administrative expenses: Shipping $14.720 Marketing (website maintenance, advertising) 2.500 Rent 15,000 General and administration 31.000 Total Selling and administration expenses $63,220 Operating income/(loss) ($16.564) Additional notes: Subscription price is $20 box per month COGS is $8 per box per month COGS only includes the cost of the tea. . Al fixed overhead costs are included within selling and administrative expenses General and administrative expenses includes wages Taylor does not receive a wage salary EXHIBIT B Discussions with staff Shipping expenses are put in a "package and ship tea activity and generate and administrative expenses are split into three activities: "set up member accounts, process pause-and-restart requests and support members". Cost drivers were selected by Taylor and activity rates were determined through discussions with Taylor and the staff by estimating the percentage of time spent on each activity Activity Cost Pool Cost Driver Total Quantity of Cost Activity Rate Driver Package and ship tea Number of boxes 3,888 $3.786 per box shipped Set up member Number of new 150 $5 per member accounts members Process pause and Number of pause and 600 $49.584 per request restart requests restart requests Support members Number of members 150 $3.333 per member