Cat & Joes Pig Rig saw immediate success. In the early months, the business outperformed its revenue and profit projections. But Cat and Joe did not wish to rest on their laurels. They knew that they were enjoying early success not only because they offered a good product but also because the food truck was a novelty in Kamloops. They were pleased to have a first-mover advantage, but they knew it would not last forever. They needed to continue to develop a loyal customer base and were also working hard to expand the event and private catering side of their business. The food trucks signature dish was its Ripped Pig pulled pork sandwich.4 The sandwich came in a combo with coleslaw, baked beans, and French fries and was priced at $12. The company had variable costs, which included the cost of the food, clamshell packaging, and variable overhead. Variable costs were 40% of the companys revenues. There was no labor cost as neither Joe nor Cat drew a wage or salary. Fixed costs included items such as gas for the generator, maintenance, business licenses, and truck depreciation. These costs totaled $10,000 per year. The operational year for the food druck was 180 days. Corporate income tax rates for small businesses in British Columbia were approximately 20% around that time. The pork needed to be put in the smoker at least 12 hours in advance of service, which created two challenges for Joe. First, it meant that he worked virtually 24 hours a day. Operating the truck meant setting up, serving, and cleaning up from 10 a.m. to 7 p.m. But when service was over, Joes day was not done. He needed to smoke the pork overnightwhich involved putting the pork in the smoker late in the evening (with just the right blend of wood chips), and waking up to tend to the meat in two-hour intervals throughout the night, spraying the meat to ensure it would have the right consistency and tender quality when it was served the next day. Although it was exhausting work, Joe was willing; he had a great work ethic, he was his own boss, and smoking meat was one of his passions. IMA EDUCATIONAL CASE JOURNAL 2 VOL. 7, NO. 3, ART. 3, SEPTEMBER 2014 The second challenge presented by the 12-hour cooking requirement was determining how much pork to smoketoo much or too little could be a disaster. If Joe did not prepare enough meat the night before, he could not simply go out and buy more if they were having an unusually busy day. Failure to project high demand meant the Pig Rig would be sold out for the day, and Joe and Cat would need to close the truck early, leaving customers unsatisfied. If Joe prepared too much meat, and they didnt sell out, the extra meat would be donated to a local soup kitchen. While Cat and Joe felt good about doing something generous in their community, donating pork meant inefficiency and significantly reduced their profits. Forecasting poorly was a huge risk for their business, and mistakes were costly. Fortunately, experience meant that Cat and Joe were getting better at predicting how many customers they could expect in a day. On a typical day, Cat and Joe served between 75 and 125 patrons, with an average of 100. The amount varied based on the weather, the day of the week, and other factors such as nearby local events. Joe also had a formula for when the truck was invited to special events: He expected 35% of attendees would purchase food, not necessarily from him, but from one of the food vendors at the event. He would use this ratio to estimate the number of potential customers. He would then divide his estimate for potential customers by the number of vendors serving the event. If he was the only vendor, he would get all of the potential customers, if there were two vendors, he expected to get 50% of the food-buying customers. This number would serve as his guideline for how many pounds of meat he would need to smoke the night before. It had proven to be accurate in the past, and Joe intended to use this formula for any special events going in the future. A crucial aspect of the companys success was its marketing strategy, which focused on social media. Because their food truck changed locations frequently, Cat and Joe wanted to ensure that customers knew where to find them, and the best way to do this was online. They were very active on Facebook, Instagram, and Twitter5 and, as of 2014, had not spent any money on traditional marketing. They had the largest social media presence of any restaurant or food truck in Kamloops. And it was through social media that the organizers of Bullarama contacted Cat and Joe.

Prepare a contribution-format income statement for one days business at the Pig Rig based on optimistic, realistic, and pessimistic projections for a regular, non- event day in Kamloops.