Assume that the company expects customer sales to decline by 20% next year. There will be no change in sales prices. Prepare forecasted financial results for next year following the format of the contribution margin (CVP) income statement for each of the three scenarios (assume a 30% tax rate).

Assume that the company expects customer sales to increase by 20% next year. There will be no change in sales prices. Prepare forecasted financial results for next year following the format of the contribution margin (CVP) income statement for each of the three scenarios (assume a 30% tax rate).

Identify at least two advantages and disadvantages of adding bakery items versus a drive-thru. If sales greatly decrease/or increase, which alternative has the greatest change in net income?

Compute the Profit Margin and Return on Assets for each scenario assuming average total assets currently are $300,000; average total assets for bakery would be $500,000 and average total assets for drive-thru would be $700,000. Industry averages are 30% profit margin and 5% ROA.

Classic Coffee Company Husband and wife, John and Mae West, decided to start their own business which would bring great coffee from all over the world to their local community. Together they have formed Classic Coffee Company, or CCC. John is selecting and making the coffee they serve. Mae manages the front and back office; selling coffee to customers, paying employees, and running ads for the coffee shop. Last year, the company sold 48,800 units and had the below sales and cost figures. Sales Variable Costs Contribution Margin Fixed Costs Income Before Taxes Income Tax Net Income $ 134 200.00 $ 29 280.00 $ 104,920.00 $ 52.000.00 $ 52.920.00 $ 15,876.00 $ 37,044.00 The husband and wife team have been in business for 2 years. With competition rising in the coffee industry, they know that another challenging and competitive year lies ahead of them. They are considering two alternatives and have hired your consulting group, known for its inventive business and accounting consulting work, to help them make some important business decisions. Alternative 1- Bakery Facing stiff competition from other coffee and beverage shops, Classic Coffee Company (CCC) is considering expanding its products to include bakery items. CCC would now experience higher average sales amounts per customer since beverage sales may be accompanied with food sales. This would, however, increase the company's variable costs since it would need to purchase the food items from outside vendors. The following data pertains to adding the bakery option: Total sales in the number of units would increase 25% with the added bakery option. The average sales price per unit would increase from the current $2.75 to $4.00 when food sales are added to the coffee shop. The variable cost per unit would increase to $1.50 per unit to account for the added cost of bakery items. There would be an increase in fixed costs of $30,000 for advertising to inform the public of this change. Alternative 2 - Drive Thru CCC is thinking about having a drive-thru installed. Having this amenity would help the coffee shop increase its customer base, allowing them to reach a greater number of customers. This added convenience would permit CCC to slightly increase the price of its average coffee and would not increase the per unit variable costs for the company. The following data pertains to adding . This alternative is exclusive of alternative 1 Total sales in the number of units would double what it was last year. The construction of the drive-thru would increase fixed costs by $150,000 - which represents one- time construction and installation costs. . This alternative would allow CCC to increase their average sales price to $3.30 a cup of coffee and their variable cost per unit would remain the same