Brain Up, Brain On, Brew Up Some Money ! The Brewery Base Case Witches Brew

Professor Peter wants to start a new brewing business in NYC (He prefers Fiji, Tahiti or some other South Pacific spot but his he is shackled by the global pandemic to home and also loves working with his college students). Mayer understands that his fixed cost will include: capital equipment, a brewers permit and a single royalty payment for the famous recipe. He believes that the total fixed costs would be roughly 1 million US Dollars. He is not certain who he will pay the royalty payment to. However, he also understands that his variable cost includes: Packaging (cans, bottles, labels and bottle caps but not the bottling equipment), employee wages, water, utilities, and the main ingredients like barley, hops, yeast and coffee (Its really a modified German beer 6% ABV).

#1) Peter has run many mathematical models that list the cost of the ingredients and hours required to produce this product. After many hours and many Coffee Beers he is convinced that he can not only sell the product for $200 per barrel (a common unit of measure within the industry) but that his cost per unit would be just around $75 to produce. How many units does Professor Peter need to brew? (SHOW YOUR WORK in MICROSOFT EXCEL CREATE A TAB CALLED BASE CASE) This is your first calculation.

#2) Now that you have successfully consulted Prof. Mayer about the amount of beer that he will need to produce before making money, he has also told you that he wants to ensure that he (himself) wants to take an annual salary (before taxes of course) of 275,000 dollars per year. This is NOT negotiable after all arent we supposed to make some money? (Again, in Microsoft Excel show your work. Create a second tab called with 250 K.

#3) The Professor is thinking about what you have told him and is concerned about if he can sell enough of this coffee beer in a year. However.. And thats a pausing HOWEVER as he thinks he needs YOU as a values team member. He thinks often about Adam Smith. If I can do this and do this well, I should pay someone to calculate everything, learn and know all the facts. He believes in you and thinks that you are worth at least $75,000 per year to start. He wonders how much he will need to sell know. Create a third tab called Your Name. Calculate what you will need to do in order for you to be on board with Prof. Mayers coffee beer business. What do you think? Create a text box and write a brief couple of sentences describing your thoughts.) Make sure the Professor know what you want what needs be done. Remember, this youre your appointment to opportunity. Do you want a partnership or some other form of business discussed? Why? Explain in text what form and why.

#4) Mayer wants to think about this arrangement that you have proposed above a little more. He doesnt really mind paying you the 75,000 per year and frankly thinks you may be worth lots and lots more. He realizes that this isnt always about money but after all when you do well those around you should do better also. In fact, ownership is NOT out of the question at all. After all, relationships matter! Mayer is more concerned about cost and other issues. On his way home from the local grocery store (some place in the Bronx) he decides to take the long way home driving down Super Tramp Road (way past Gun Hill Road). Passing the bakery as he leaves the city he keeps driving and an hour or more and later passes a picturesque fall farm, where people can pick apples, pumpkins, pears and all sorts of other things (dont forget the seasonal squash) while feeding chickens, petting baby cows, sheep, lambs and doing all that fun farming stuff. Just after passed the farm, Prof. Mayer slams on the brakes and pulls over to the side of the road thinking about... The Land, Labor, Capital, Knowledge and Entrepreneurial Spirit. He thought why NOT alter the formula? After all, people love coffee, they love beer and they love pumpkin flavored beer and pumpkin flavored coffee. Why not pumpkin flavored coffee beer? He decides that this cannot wait so calls you on your mobile phone. He screams into the phone ADD ten pounds of roasted pumpkin along with 3 ounces of pumpkin pie spice to each barrel. Of beer After hanging up the phone you realize that you have no idea what roasted pumpkin or pumpkin pie spice cost. Luckily Trader Joes and Aldi sell these items but you choose to Amazon search these and find that Pumpkin can be purchased in a 6 pound can for $11.99 and Pumpkin Pie Spice is $6.89 for 16 ounces on the Webstaurant Store web site but you may even find each of these for less. How much of each of these new ingredients will you need and, how will this impact your work above? Can you buy these goods for less money? Create a fourth tab and call this tab New Recipe. #5) Revenue and Expense. Given the fact that this recipe will sell all that is produced with demand exceeding supply, Prof. Mayer would like to know what the new product Revenues and Expenses will be. Create another tab called P&L. Comparing the old recipe with the new recipe (side by side), what is the revenue for each and what are the total variable expenses for each? (Hint Number of barrels times selling price)

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