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Snowie"M, owned by Carl and Gordon Rupp, is a company that provides training, equipment, and supplies for operating a shaved ice business. Shaved ice is an ice-based refreshment made by shaving a block of ice into a fluffy, snow-like ice. The product is served in cups with flavored syrups added to the ice. Due to its fine texture, shaved ice absorbs the syrup. making each bite flavorful. Snowic does not sell franchises. It sells a wide array of equipment and supplies, including ice shavers, kiosks, carts, buses, syrups, cups, and other supplies to independent operators. PART 1: COST-VOLUME-PROFIT ANALYSIS FOR A SNOWIE KIOSK Assume that you are evaluating whether to star a Snowie' business. You could operate a shaved ice kiosk at fairs, downtown areas, and other outdoor events. The kiosk is portable with wheels and a hitch. It has plenty of storage place, work area, electrical outlets, lighting, and a water system. The flavored shaved ice, a "Snowie," is normally offered in three sizes. For this case, we are going to assume that only one size is offered-the large size, 20oz. The large Snowie sells for US4.00. See Table for a list of all costs related to a large size Snowie. In this case, use straight-line depreciation with a fiveyear life and salvage values of zero for both the ice shavers and the flavor station. All monetary amounts in this case are expressed in U.S. dollars. REQUIREMENTS 1. Specify your assumptions about the following items: a. Number of days you anticipate opening the Snowie kiosk per month b. Number of hours you will work (no wages required) per day c. Number of hours you will pay an employee to work in the Snowie kiosk per day 2. Is the cost of syrup a variable or fixed cost with respect to the number of Snowies sold? What is the cost of syrup per Snowie? (Use four decimal places in your response and all calculations for this question.) 3. Is the cost of the worker attending the kiosk a variable or fixed cost with respect to the number of Snowies sold? What is the cost of the worker's wages per day and per month? 4. What is the total variable cost per Snowie (per cup)? 5. What is the total fixed cost per month to operate the Snowie business? 6. Calculate the number of Snowies that you need to sell each month to break even. 7. How many snow cones must be sold to achieve an operating profit of US $2,000.00 per month (before tax)? 8. Think about the break even and target profit quantities you just calculated. Do you think these quantities are realistic? Discuss and support your answer. Assume that Main Street Kent, an organization that hosts outdoor events in downtown Kent, approaches you about bringing your Snowie kiosk to the Octoberfest in Kent for one day in October. Main Street Kent will provide the cups for the event that are branded with the Kent Octoberfest logo, so you will not have any cup costs for this event. Main Street Kent will also not be charging you a registration fee for this event. Main Streer Kent will allow you to advertise your business in its mailings for two months at no cost and asks you to cut your Snowie price for this one event to US $3.00 in exchange for the free advertising. You have no ocher event scheduled for this one day in October, and you would work the event by yourself (you will not pay an employee for this one-day event). You anticipate that you will sell 200 Snowies on this one day at Octoberfest. Do you accept Main Street Kent's special price offer? Why or why not? Support your answer. PART 3: BUDGETING FOR A SNOWIE BUSINESS Now assume the Snowie supplier increases the cost of a gallon of the Snowie syrup to US $8.00 (from its original cost of US\$4.25). In response, you increase the selling price of a large Snowie to US\$5.00. REQUIREMENTS 1. Make the following assumptions (you can re-use your yourselt (you will not pay an employee for this one-day exent). You anticipate that you will sell 200 Snowies on this one day at Octoberfest. Do you accept Main Street Kent's special price offer? Why or why not? Support your answer. PART 3: BUDGETING FOR A SNOWIE BUSINESS Now assume the Snowie supplier increases the cost of a gallon of the Snowie syrup to US $8.00 (from its original cost. of US\$4.25). In response, you increase the selling price of a large Snowie to US $5.00. REQUIREMENTS 1. Make the following assumptions (you can re-use your assumptions from Part 1 if you wish or you can change them): a. Number of days you anticipate opening the Snowie kiosk per month b. Number of hours you will work (no wages required) per day c. Number of hours you will pay an employee to work in the Snowic kiosk per day d. How many Snowies you estimate you will sell on an average day 2. Prepare a budgeted contribution margin income statement for one month using the data given in Part 1 and the assumptions that you listed in Part 3. Provide a separate line for each variable cost and for each fixed cost. 3. What other factors should you consider before deciding to start a Snowic business? Snowies Shaved lce B... ABOUT IMA* (INSTITUTE OF MANAGEMENT ACCOUNTANTS) IMA, the association of accountants and financial professionals in business, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA (Ceruified Management Accountant) program, continuing education, networking and advocicy of the highest ethical business practices. IMA has a global network of more than 85,000 members in 140 countries and 300 professional Requirement 1: Memo Memo Requirements (Case I) - Assume you are consulting for James Barnes, Jr., a retired army veteran, who is evaluating the Snowie's Shaved Ice Business as a business opportunity. As many retirees do, he decided to establish himself in the Tampa Bay/Bradenton/Sarasota area. - Assume the memo header is: To:From:Re:James"Bucky"Barnes,Jr.YourcompanySnowiesShavedIceBusiness. (Remember, though, that you do not need to have this heading on your submission.) - The memo should recommend, based on the analysis of the information provided in the case and on any appropriate additional analyses, whether Mr. Barnes should invest in the Snowie's Shaved Ice Business. Include in your discussion any non-business factors that should be considered in the decision. - The focus of the analysis will be based on Part 1 (COSTVOLUME-PROFIT ANALYSIS FOR A SNOWIE KIOSK) and Part 3 (BUDGETING FOR A SNOWIE BUSINESS) of the case. - Assumptions and clarifications for Part 1 are as follows: - The "number of hours you will work" means, actual hours of operation of the kiosk (i.e., open for business to serve customers). Preparation, transportation, set-up and clean up are not included in this number of hours. - The "number of hours you will pay an employee" should consider that the employee may need to be available for set-up and clean-up in addition to the work serving customers. - You, as the consultant, should make reasonable assumptions about the demand in the area, the - You, as the consultant, should make reasonable assumptions about the demand in the area, the weather, etc. when establishing your work days and hours. Assumptions for Part 3 requirement 1 regarding the number of days of operation, the number of hours of operations and the number of hours that will be paid to the employee should be the same as the ones used in Part 1. - At a minimum you should present Exhibits showing: - A schedule summarizing the assumptions used for the baseline case on Part 1, detail of which costs are considered variable and which are considered fixed and the break-even point. A Contribution Margin Income Statement (pre-tax) for one month using the data given and assumptions made in the baseline case on Part 1. Provide a separate line for each variable cost and for each fixed cost. A Comparative Contribution Margin Income Statement (pre-tax) where you compare the baseline case in Part 1 , the scenario described in Part 3, and the following alternative scenarios: - The volume of sales you calculated you calculated for part 1 but including the change in price of syrup price; assume no change in sale price per snow cone. - The volume of sales to achieve operating profits of $2,000,$3,000, and $4,000 under the assumptions of part 3 . - You can do condensed Income statement for this part (i.e., you may present the Sales, summarized variable costs and summarized fixed costs). - The body of the memo should not exceed one single spaced page with a 10 to 12-point font. Note that the exhibits should be atrached to the memo and not be embedded in the one page write up. You are expected to reference the appropriate exhibits and data to support your conclusions. - Exhibits should be attached to the memo and numbered in the order that are referenced in the memo. - The submission should be done in one single document where you include the memo and the exhibits. Do not submit separate documents for the memo and the exhibits. Everything should be included in the same doctument. - You may post questions regarding the case in the Ask Dr. Carlos page of Module 6. - See the Rubric (below) for more guidance regarding the criteria that will be use to evaluate your work. Requirement 2: Board Discussion Go to the Snowie's Shaved Ice Business Case Board Discussion and: - Discuss whether or not Mr. Barnes should invest in the business or not. Your discussion should include: - Your assumptions about the operating days, hours, etc. - The effect of the increase in the syrup price on the break-even point relative to the baseline case. In your opinion, the chances of the business being a good investment for Mr. Barnes. - After your post, you will make a comment on at least one of your classmates' posts with your opinion on their thoughts regarding the case