BACKGROUND

IceTreat, Inc. is owned by Carlton and Katerina Minor. The company provides supplies and equipment for operating a crushed ice business. The product consists of syrup-flavored crushed ice served in a cup. IceTreat sells equipment and supplies, including ice crushers, flavor machines, operating carts, syrups, cups and other supplies to businesses.

PART 1: COST-VOLUME-PROFIT ANALYSIS FOR AN ICE TREAT CART Assume that you are evaluating whether to start an IceTreat business. You could operate a crushed ice cart at fairs, festivals and other outside venues. The cart is portable with wheels and a hitch for transport and has sufficient work and storage space as well as electric and water outlets to support an efficient operation. The flavored crushed ice is called an IceTreat and is sold in a 20 oz. size for $4.00 each. See Table for a list of all costs related to the 20-oz. IceTreat.

To compute depreciation for this case, use the straight-line method, assuming a useful life of five years and no salvage value. The equipment to be depreciated includes the ice crushers and the flavor machine. 6. Calculate the number of IceTreats that you need to sell each month to break even. 7. How many IceTreats must be sold to achieve an operating profit of $2,000 per month (before tax)? 8. Think about the break even and target profit quantities you just calculated. Do you think these quantities are realistic? Discuss and support your answer.