Best friends, Nathan and Cody, decided to start their ow business which would bring great coffee from all over thi world to their local community. Together they formed Cl Coffee Company, or CCC (assume their coffee shop is located a few miles from our college campus). Nathan i: selecting and making the coffee they serve. Cody mana the front and back office; selling coffee to customers, pa employees, and running ads for the coffee shop. Last year, the company sold 50,000 units and had the bi sales and cost figures. The team have been in business for two years. With competition rising in the coffee industry, they know that another challenging and competitive year lies ahead of t They are considering two alternatives and have hired yc their business consultant to help them make this importe business decision. READ ONLY - This is an older file format. To make cha... more Upgrade a copy 1.) Compute the company's contribution margin in total dollars and per unit dollars under the 3 scenarios ( 3 points): - Currently - Alternative 1: Bakery - Alternative 2: Drive-thru 2.) Compute the company's contribution margin ratio under the 3 scenarios. (Note: DO NOT ROUND the CMR \% for accurate calculations in the following questions) You may find it easier to use formulas in excel as it will use the entire figure in the formula calculation. (3 points). 3.) Compute the break-even point in units under the 3 scenarios (3 points). 4.) Compute the break-even point in sales dollars under the 3 scenarios ( 3 points). 5.) Compute the Profit Margin and Return on Assets under the 3 scenarios. Assume current average assets are $250,000. Average current assets for Alternative 1: Bakery would be $300,000, and Altemative 2: Drive-thru would be $400,000. (3 points) 6.) Compute the Degree of Operating Leverage for Altemative 1 : Bakery and Alternative 2: Drive-Thru ( 3 points). 7.) Assume that the company expects customer sales to decline by 20% next year. There will be no change in sales prices. Compute the net income for each of the three scenarios (assume a 30% tax rate). ( 6 points) 8.) Assume that the company expects customer sales to increase by 20% next year. There will be no change in sales prices. Compute the net income for each of the three scenarios (assume a 30% tax rate). ( 6 points) 9.) Compute the sales units required if the company wishes to generate a Target Income Before Taxes of $100,000 for all 3 scenarios. (6 points) 10.) What would the net income be under Alternative 1-Bakery and Alternative 2-Drive-Thru if CCC was unable to increase sales in units (sales units remain the same as last year)? (4 points). 11.) The company can only pick one of the alternatives (Either Bakery or Drive-Thru), due to the time and resources involved Analyze and compare your calculations above for alternative and altemative 2, which alternative do you recommend to Nathan and Cody? Explain which alternative you recommend and why. You will need to state 2 qualitative reasons and 3 quantitative (financial) reasons. (10 points)
