GoGo Juice is a combination gas station and convenlence 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 recelves 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. Part 1 (Static) Requlred: 1. If GoGo Julce 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 mlx remains constant. Prepare a contribution Income statement to support your answer. 2. Calculate the breakeven sales (In dollars) for GoGo Julce If the promotional effort is Implemented. Assume that the product mIx remains constant. Use the weighted-average contribution margin ratlo approach to generate your answer. (Hint: Sales mlx for this purpose is defined on the basis of relatlve sales dollars, not units.) 3. Based on the assumed sales mix (determined on the basis of relative sales dollars, not units), determine the composition of total breakeven sales dollars across the three product IInes: gas; food and beverages; and other products. 4. Disregarding your responses to requirements 1 and 2 , assume the weighted-average contribution margin ratio, after Implementation of the coupon program, Is 35 percent. Calculate the before tax profit (loss) for GoGo Julce, assuming sales Increase 20 percent due to the new program. Assume that the sales mix in terms of relatlve sales dollars remains constant. GoGo Juice is a combination gas station and convenlence 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 recelves 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. Part 1 (Static) Requlred: 1. If GoGo Julce 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 mlx remains constant. Prepare a contribution Income statement to support your answer. 2. Calculate the breakeven sales (In dollars) for GoGo Julce If the promotional effort is Implemented. Assume that the product mIx remains constant. Use the weighted-average contribution margin ratlo approach to generate your answer. (Hint: Sales mlx for this purpose is defined on the basis of relatlve sales dollars, not units.) 3. Based on the assumed sales mix (determined on the basis of relative sales dollars, not units), determine the composition of total breakeven sales dollars across the three product IInes: gas; food and beverages; and other products. 4. Disregarding your responses to requirements 1 and 2 , assume the weighted-average contribution margin ratio, after Implementation of the coupon program, Is 35 percent. Calculate the before tax profit (loss) for GoGo Julce, assuming sales Increase 20 percent due to the new program. Assume that the sales mix in terms of relatlve sales dollars remains constant
