I NEED ANSWERS FOR QUESTION #6 PLEASE?

9th graders Jonathan, Kathy and Joey wanted to make money during their two-month summer vacation, and talked Jonathan's mother into helping. We need to know the answers to two questions. 1. How much profit can their business make? 2. How much money do you need to get the business started and to keep it going until you make a profit? . Background information - based on interviewing Jonathan, Kathy, and Joey: How many customers do you expect to attract during the 2 months? How much will they buy? We will count on an average of 5 customers an hour. We will be open 6 hours a day for 2 months (60 days). Therefore, we can expect 1,800 customers over a 2- month period. If they serve 6-ounce cups, the kids will serve 10,800 ounces in two months, or 180 ounces per day. Since there are 128 ounces per gallon, and the kids will serve 180 ounces of lemonade per day, customers will buy approximately 1.41 gallons of lemonade a day, or 84.6 gallons in 2 months. In addition, they expect to sell 5 gallons in bulk over the 2 months, or a total of 89.6 gallons. How much will it cost to make that amount of lemonade? After shopping around for the best prices, they found it would cost $7.39 per gallon: 24 lemons @ $.25 $6.00 1 lb sugar @ $.40 40 21 6-ounce cups @ $.04 .84 food coloring and napkins .10 1/2 lb. Ice @ $.10 .05 Total Cost per Gallon $7.39 . . WWW How much will you need to charge for lemonade?|| With 1 gallon of lemonade, we can fill 21 6-ounce cups (128 oz divided by 6 + 21.3 cups). It will cost $.352 to make a 6-ounce cup of lemonade ($7.39 divided by 21 cups $.352 per cup). They found that nearby competitors were charging between 50 cents for a 12 ounce soda and 89 cents for a 12 ounce lemonade. Since it costs 35 cents to make a cup without adding expenses and profit, they decide to charge 60 cents a cup. . What will total sales be at a selling price of 60 cents per cup? Answer: _(30 cups per day X 60 days X $.60 per cup = $1080) plus (5 gallons @ $10.00 per gallon = $50). Total sales will be $1,130 COGS= Fixed costs. These are fixed because you are buying them ahead of time, regardless of how many you sell. How much will the lemonade ingredients and other items cost? Answer: _(90 gallons X $7.39 per gallon = Cost of goods sold 90 gallons is 89.6 gallons, rounded up. What are operating expenses? (variable) They plan to pay a small wage to the person working the stand (50 cents per hour). They will need advertising posters for the stand. They estimate operating costs at (360 hours X $.50 = $180) plus posters (4 posters @ $1.00 = $4.00). Total operating expenses = $184.00 Questions: 1. Calculate profitability ratios, given the background data you have, and make sure to show your calculation and interpret the result in words (HINT - you might want to construct a simple income statement to help you figure these out): a. Gross profit, the profit a company makes after deducting the costs associated with making and selling its products. b. Gross profit margin, a/k/a/ gross margin ratio C. Operating profit, the profitability of the business, before taking into account interest and taxes. d. Operating profit margin, a/k/a operating profit margin ratio -- how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc. It shows the efficiency of a company controlling the costs and expenses associated with business operations. 2. Use the following calculations to determine the lemonade stand's breakeven. a. Break-Even Point in Units = Total Monthly Fixed Costs/Gross Profit per unit (Sales Price per unit minus Variable cost per unit) b. Break-Even Point in Dollars: In other words: You must sell XXX cups of lemonade each month to "break-even" c. When do they break-even? 3. How would the profit be different if they decided to use half as many lemons in their recipe for lemonade? 4. What would happen to the profit if they were able to sell the lemonade for $1.00 per cup? 5. What price do you think would be the best for them to charge for lemonade 6. What happens if their customer estimate is wrong and they only have half as many lemonade customers? 7. Extra credit: How would the "Cost of Goods Sold" be changed if you had to account for the value of your inventory left over at the end of your accounting period? They assumed that all the lemonade would be sold in this example. 9th graders Jonathan, Kathy and Joey wanted to make money during their two-month summer vacation, and talked Jonathan's mother into helping. We need to know the answers to two questions. 1. How much profit can their business make? 2. How much money do you need to get the business started and to keep it going until you make a profit? . Background information - based on interviewing Jonathan, Kathy, and Joey: How many customers do you expect to attract during the 2 months? How much will they buy? We will count on an average of 5 customers an hour. We will be open 6 hours a day for 2 months (60 days). Therefore, we can expect 1,800 customers over a 2- month period. If they serve 6-ounce cups, the kids will serve 10,800 ounces in two months, or 180 ounces per day. Since there are 128 ounces per gallon, and the kids will serve 180 ounces of lemonade per day, customers will buy approximately 1.41 gallons of lemonade a day, or 84.6 gallons in 2 months. In addition, they expect to sell 5 gallons in bulk over the 2 months, or a total of 89.6 gallons. How much will it cost to make that amount of lemonade? After shopping around for the best prices, they found it would cost $7.39 per gallon: 24 lemons @ $.25 $6.00 1 lb sugar @ $.40 40 21 6-ounce cups @ $.04 .84 food coloring and napkins .10 1/2 lb. Ice @ $.10 .05 Total Cost per Gallon $7.39 . . WWW How much will you need to charge for lemonade?|| With 1 gallon of lemonade, we can fill 21 6-ounce cups (128 oz divided by 6 + 21.3 cups). It will cost $.352 to make a 6-ounce cup of lemonade ($7.39 divided by 21 cups $.352 per cup). They found that nearby competitors were charging between 50 cents for a 12 ounce soda and 89 cents for a 12 ounce lemonade. Since it costs 35 cents to make a cup without adding expenses and profit, they decide to charge 60 cents a cup. . What will total sales be at a selling price of 60 cents per cup? Answer: _(30 cups per day X 60 days X $.60 per cup = $1080) plus (5 gallons @ $10.00 per gallon = $50). Total sales will be $1,130 COGS= Fixed costs. These are fixed because you are buying them ahead of time, regardless of how many you sell. How much will the lemonade ingredients and other items cost? Answer: _(90 gallons X $7.39 per gallon = Cost of goods sold 90 gallons is 89.6 gallons, rounded up. What are operating expenses? (variable) They plan to pay a small wage to the person working the stand (50 cents per hour). They will need advertising posters for the stand. They estimate operating costs at (360 hours X $.50 = $180) plus posters (4 posters @ $1.00 = $4.00). Total operating expenses = $184.00 Questions: 1. Calculate profitability ratios, given the background data you have, and make sure to show your calculation and interpret the result in words (HINT - you might want to construct a simple income statement to help you figure these out): a. Gross profit, the profit a company makes after deducting the costs associated with making and selling its products. b. Gross profit margin, a/k/a/ gross margin ratio C. Operating profit, the profitability of the business, before taking into account interest and taxes. d. Operating profit margin, a/k/a operating profit margin ratio -- how much profit a company makes after paying for variable costs of production such as wages, raw materials, etc. It shows the efficiency of a company controlling the costs and expenses associated with business operations. 2. Use the following calculations to determine the lemonade stand's breakeven. a. Break-Even Point in Units = Total Monthly Fixed Costs/Gross Profit per unit (Sales Price per unit minus Variable cost per unit) b. Break-Even Point in Dollars: In other words: You must sell XXX cups of lemonade each month to "break-even" c. When do they break-even? 3. How would the profit be different if they decided to use half as many lemons in their recipe for lemonade? 4. What would happen to the profit if they were able to sell the lemonade for $1.00 per cup? 5. What price do you think would be the best for them to charge for lemonade 6. What happens if their customer estimate is wrong and they only have half as many lemonade customers? 7. Extra credit: How would the "Cost of Goods Sold" be changed if you had to account for the value of your inventory left over at the end of your accounting period? They assumed that all the lemonade would be sold in this example