GoGo Juice is a combination gas station and convenience store located at a busy intersection. Recently, a national chain opened a similar store only a block away; consequently, sales have decreased for GoGo. In an effort to reclaim lost sales, GoGo has implemented a promotional effort; for every $10 purchase at GoGo, the customer receives a $1 coupon that can be redeemed toward the purchase of gasoline. The average gasoline customer purchases 15 gallons of gasoline at $2.50 per gallon. The results of an average month, prior to this coupon promotion, are shown below. Not included in the information presented below is the monthly cost of printing the coupons, which is estimated to be $500. Coupons are issued on the basis of total purchases regardless of whether the purchases are paid in cash or paid by redeeming coupons. Assume that coupons are distributed to customers for 75 percent of the total sales. Also assume that all coupons distributed are used to purchase gasoline. Cost of Sales (per unit or of retail) $1.875 per gallon 608 Sales Gasoline Food and beverages Other products $100,000 60,000 40,000 50% Other Costs Labor-station attendants $10,000 2,500 40,000 Labor-supervision Rent, power, supplies, and other Depreciation (pumps, computers, counters, fixtures, and building) 7,500 Required 2 Required 3 Required 4 Required 1 If GoGo Juice implements the promotional coupon effort, calculate the profit (loss) before tax if the sales volume remains constant and the coupons are used to purchase gasoline. Assume the sales mix remains constant. Prepare a contribution income statement to support your answer GoGo Juice Contribution Income Statement Gasoline Food Other Total Required 2 Required 1 GoGo Juice is a combination gas station and convenience store located at a busy intersection. Recently, a national chain opened a similar store only a block away; consequently, sales have decreased for GoGo. In an effort to reclaim lost sales, GoGo has implemented a promotional effort; for every $10 purchase at GoGo, the customer receives a $1 coupon that can be redeemed toward the purchase of gasoline. The average gasoline customer purchases 15 gallons of gasoline at $2.50 per gallon. The results of an average month, prior to this coupon promotion, are shown below. Not included in the information presented below is the monthly cost of printing the coupons, which is estimated to be $500. Coupons are issued on the basis of total purchases regardless of whether the purchases are paid in cash or paid by redeeming coupons. Assume that coupons are distributed to customers for 75 percent of the total sales. Also assume that all coupons distributed are used to purchase gasoline. Cost of Sales (per unit or of retail) $1.875 per gallon 608 Sales Gasoline Food and beverages Other products $100,000 60,000 40,000 50% Other Costs Labor-station attendants $10,000 2,500 40,000 Labor-supervision Rent, power, supplies, and other Depreciation (pumps, computers, counters, fixtures, and building) 7,500 Required 2 Required 3 Required 4 Required 1 If GoGo Juice implements the promotional coupon effort, calculate the profit (loss) before tax if the sales volume remains constant and the coupons are used to purchase gasoline. Assume the sales mix remains constant. Prepare a contribution income statement to support your answer GoGo Juice Contribution Income Statement Gasoline Food Other Total Required 2 Required 1
