In 2013, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larrys Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $900,000 in 2013 and were estimated at $1.5 million in 2014.

Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3 and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Brandies salary and expenses for an accountant and two other administrative staff, were estimated at $150,000 in year 2014. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in year 2014.

An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in Lower Downtown (known as LoDo) occurred at the beginning of 2013 and additional equipment needed to make the amount of yogurt forecasted to be sold in 2014 was purchased at the beginning of 2014. As a result, depreciation expenses were expected to be $50,000 in year 2014. Interest expenses were estimated at $15,000 in 2014. The average tax rate was expected to be 21 percent of taxable income.

E) Calculate the EBDAT breakeven point for year 2014 in terms of survival revenues for Jen and Larrys Frozen Yogurt Company.

F) How many cups of frozen yogurt would have to be sold to reach EBDAT breakeven?

G) Show what would happen to the EBDAT breakeven in terms of survival revenues if the cost of producing a cup of yogurt increased to $1.60 but the selling price remained at $3.00 per cup.

H) How would the EBDAT breakeven change if production costs declined to $1.40 per cup when the yogurt selling price remained at $3.00 per cup?

I) Show what would happen to the EBDAT breakeven point in terms of survival sales if an additional $30,000 was spent on advertising in year 2014 while the other fixed costs remained the same, production costs remained at $1.50 per cup, and the selling price at $3.00 per cup.

J) Now assume that due to competition, Jen and Larry must sell their Frozen Yogurt for $2.80 per cup in year 2014 and everything else is expected to remain the same as projected in the initial discussion of Jen and Larrys venture. Calculate the EBDAT breakeven point in terms of survival breakeven revenues.