Joe has opened a milk shake stand at Scottsdale Fashion Square. It has proven quite popular amongst shoppers and sales have continued to grow. As sales have grown, Joe has found that his profit margin has declined. Concerned about this he has hired you to review his financial results Exhibit 1 - Recipe and cost of goods Joe produced one type of milk shake - chocolate - and in one size. The inputs and cost are below: Per Shake Units Cost Units Whole Milk $15 640 oz 2 oz $20 128 oz Cream 2 oz $10 30 cups $24 600 oz Sugar 0.5 cups 6 oz Ice Cream $200 500 cups Cup 1 cup Joe pays $5,000 a month in rent. He uses a fixed staffing of 20 hours per day and his labor cost including taxes and benefits is $20 per hour. Joe also spends $2,000 a month in advertising. Last month Joe had the following results in a 30 day month Joe's Shakes Jun-19 $4.50 Price per Shake Shakes Sold 10,000 Labor 12,000 Milk 586 Cups 3,000 Rent 5,000 Sugar 14,500 Cream 3,125 Advertising 2,000 Ice Cream 2,300 $2,489 Profit Sorry for the bad format Joe isn't an accountant that's why he hired you! Required: Based on the information provided from Joe prepare a flexible budget for 10,000 shakes. 1. What are the flexible budget variances for his actual June results? Joe verified that the a. pricing he gave you for materials are indeed correct. He has a sneaking suspicion his staff are giving out free cups for patrons to use at a water fountain. Joe would like to know what his profit would be if his recipe was followed perfectly and b. he sold 15,000 shakes. To accomplish this he would drop his price to $4 a shake and spend an additional $1,000 on advertising c. Write a memo to Joe discussing the variances. Identify the specific ingredients, how much extra or less was used. Speculate on what may be happening on how Joe can fix this 2. Joe wishes to open a new location using the same business model. He will pay $10,000 in rent and will have a much larger store front. How many units will he need to sell to break even? How many to make $10,000 in a month? Assume a 30 day month