Calculate Projected Revenue statement, break even and inventory turnover for the following information:

After reviewing the available

locations Colin and Ed had narrowed their choice to two possibilities. One was a 2,000

square foot space in the Great Eastern Oil building downtown at $5.40 a square foot. The

other was an 800 square foot space in the Exploit's Valley Mall. The cost here would be

$20 per square foot for a 5 year lease, $23 per square foot for a 3 year lease, or $25 per

square foot for a 1 year lease.

Drawing on his experience and some information from Statistics Canada, Colin estimated

first year sales to be between $100,000 and $150,000 depending upon the location

selected and the average sale per customer. From Statistics Canada he discovered that

36% of the population was age 15 to 34 -- the group he had determined to be his primary

target market. Thus he estimated that the trading area contained about 18,000 prospects

(50,000 X 36%). Based on experience and estimates of pedestrian traffic he further

estimated that about 3,000 of the prospects would become customers at the Exploits

Valley Mall location and about 2,500 at the downtown location. At $40 to $50 per

customer -another estimate - Cohn projected first year sales at the mall to be between

$120,000 and $150,000 and downtown to be between $100,000 and $125,000.

In the Comer Brook store, an average gross margin of 50 percent was obtained and

because of the similarity of markets, the brothers were sure that the Grand Falls store

could expect the same gross margin. This markup was consistent with the competition

based on the selling price of items with which Cohn was familiar. The major costs would

be rent and labour. Regardless of the location Cohn figured each store would require two

people working at all times. Cohn would be able to put in 30 hours a week which would

allow him time to follow up on his high school contracts. Ed would work an average of

10 hours a week for 50 weeks but would not collect any salary. Part time staff would

have to be hired to ensure there were adequate staff in the store. The major difference in

labour costs at each location would reflect the requirement that the stores in the Mall

observe set hours (Exhibit 3). Other costs included 5 percent of sales for advertising,

$100 per month for a telephone, $1,000 a year for insurance and $500 a year for office

and bookkeeping. All of the other major operating costs were included in the rent.