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Chuck Sweet and his sister Kay grew up watching their grandmother make the best chocolates at Christmas using an old family recipe. They have decided

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Chuck Sweet and his sister Kay grew up watching their grandmother make the best chocolates at Christmas using an old family recipe. They have decided that it is time to mass-market the chocolates, expecting them to be especially popular around the holiday season. They have already chosen a name for their new com- pany: the Arctic Candy Company (ACC). ACC's owners have come to you and asked for help in determining the feasibility of their new venture. They would like you to prepare a report that incorporates a break-even analysis and any other analysis you deem necessary given the information provided. You should also include a qualitative discussion of the risks and opportunities of the new venture. The information they provided is found in Exhibit 1. Required Prepare the report for Chuck and Kay, showing your calculations. > EXHIBIT 1 - INFORMATION PROVIDED BY THE ARCTIC CANDY COMPANY It is estimated that approximately $100 million is spent annually by consumers on chocolate worldwide. ACC believes that with its superior chocolate recipe, it can obtain somewhere between 0.5% and 2% of the worldwide chocolate market. Based on its market research, ACC expects the probabilities of the market potential for ACC to be as follows: 0.5% of worldwide market - 15% 1% of worldwide market -60% 2% of worldwide market - 25% ACC intends to sell each box of chocolates for $10.00 to retailers. Direct materials are expected to be $2 per box and direct labour $1. The packaging of the chocolates is expected to cost $1.50 per box. ACC will incur fixed expenses of $500,000 annually. This includes the rent on a building located in the down town core and a fixed distribution fee to retailers. ACC will not be tax exempt. It has a tax rate of 30%. In order to make the project feasible, ACC wants to ulti- mately make an after-tax annual profit of $130,000

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