GENERAL INSTRUCTIONS: You are considering opening up a coffee shop. It will be a straightforward place that sells various brews of coffee. But the first thing you want to understand is what the projection of net income will be under different scenarios. To do the upfront analysis you have accumulated data on all the costs related to running a coffee shop. These costs and sales revenue, noted below, represent all the costs you can think of based on your vision of the coffee shop. You are the business owner, but you won't take a salary. Your earnings will be based on how much Net Income the coffee shop makes. YOUR ASSIGNMENT: 1. Classify each cost as fixed or variable (see below) 2. Calculate the annual cost for cost description (see below) Using the cost and sales data below, prepare Income Statements (to the 3. right) based on the criterion provided. ALL YELLOW CELLS RFOURE DATA TO BE INPUT Cost Cost 500 150 800 150 GENERAL BUSINESS COSTS Rent Monthly $ Utilities Monthly $ Insurance Annually $ Water Quarterly $ Coffee Making Equipment - Depreciation (based on cost of $12,000 and a 5 year life and zero salvage value) Annually Table and Chair Rental Monthly $ Laptop and Credit Card Scanner Depreciation (based on cost of $4,800 with a 4 year useful life and zero salvage value) Annually Barrista Salary Annually $ Other Miscellaneous Costs Monthly $ 100 25,000 150 COST OF CUP OF COFFEE Coffee Grounds Sugar/Cream/Flavoring Paper Cup and Top Heat Protection Sleeve Plastic Stirrer per cup per cup per cup per cup per cup $ $ $ $ $ 0.75 0.05 0.12 0.05 0.03 SALES PRICE OF COFFEE per cup $ 4.00 BREAK EVEN POINT BASE SCENARIO INCOME STATEMENT SCENARIO CHANGE 1 SCENARIO CHANGE 2 SCENARIO CHANGE 3 (COMPARED TO BASE(COMPARED TO BASE (COMPARED TO BASE SCENARIO) SCENARIO) SCENARIO) What Happens to Net Income if I Use What Happens to Premium Kona Net Income if I Coffee Grounds Spend $5,000 on Costing $1.25 per YOU CREATE A Advertising and cup and Cups of SCENARO AND BRING Cups of Coffee Coffee Increases IT TO THE Increases 10%? 8%? DISCUSSION GROUP Annual Target Net At Break Even Point Income of $60,000 Sales Revenue Variable Costs Contribution Margin $ Fixed Costs Net Income $ $ S $ BREAK EVEN POINT CALCULATION BASED ON THE SCENARIO ABOVE -Cups of Coffee -Sales Revenue CM Ratio: -Dollars - Ratio GENERAL INSTRUCTIONS: You are considering opening up a coffee shop. It will be a straightforward place that sells various brews of coffee. But the first thing you want to understand is what the projection of net income will be under different scenarios. To do the upfront analysis you have accumulated data on all the costs related to running a coffee shop. These costs and sales revenue, noted below, represent all the costs you can think of based on your vision of the coffee shop. You are the business owner, but you won't take a salary. Your earnings will be based on how much Net Income the coffee shop makes. YOUR ASSIGNMENT: 1. Classify each cost as fixed or variable (see below) 2. Calculate the annual cost for cost description (see below) Using the cost and sales data below, prepare Income Statements (to the 3. right) based on the criterion provided. ALL YELLOW CELLS RFOURE DATA TO BE INPUT Cost Cost 500 150 800 150 GENERAL BUSINESS COSTS Rent Monthly $ Utilities Monthly $ Insurance Annually $ Water Quarterly $ Coffee Making Equipment - Depreciation (based on cost of $12,000 and a 5 year life and zero salvage value) Annually Table and Chair Rental Monthly $ Laptop and Credit Card Scanner Depreciation (based on cost of $4,800 with a 4 year useful life and zero salvage value) Annually Barrista Salary Annually $ Other Miscellaneous Costs Monthly $ 100 25,000 150 COST OF CUP OF COFFEE Coffee Grounds Sugar/Cream/Flavoring Paper Cup and Top Heat Protection Sleeve Plastic Stirrer per cup per cup per cup per cup per cup $ $ $ $ $ 0.75 0.05 0.12 0.05 0.03 SALES PRICE OF COFFEE per cup $ 4.00 BREAK EVEN POINT BASE SCENARIO INCOME STATEMENT SCENARIO CHANGE 1 SCENARIO CHANGE 2 SCENARIO CHANGE 3 (COMPARED TO BASE(COMPARED TO BASE (COMPARED TO BASE SCENARIO) SCENARIO) SCENARIO) What Happens to Net Income if I Use What Happens to Premium Kona Net Income if I Coffee Grounds Spend $5,000 on Costing $1.25 per YOU CREATE A Advertising and cup and Cups of SCENARO AND BRING Cups of Coffee Coffee Increases IT TO THE Increases 10%? 8%? DISCUSSION GROUP Annual Target Net At Break Even Point Income of $60,000 Sales Revenue Variable Costs Contribution Margin $ Fixed Costs Net Income $ $ S $ BREAK EVEN POINT CALCULATION BASED ON THE SCENARIO ABOVE -Cups of Coffee -Sales Revenue CM Ratio: -Dollars - Ratio
