PART 2: SPECIAL-ORDER PRICING FOR A GLACIER EVENT Assume that Park Lane Reno, an organization that hosts outdoor events in downtown Reno, approaches you about bringing your Glacier kiosk to the Octoberfest in Reno for one day in October. Park Lane Reno will provide the rups for the event that are brander with the Rena Orto herfest Inen, sn you will not have any run rasts for this event. Park Lane Reno will also not be charging you a registration fee for this event. Park Lane Reno will allow you to advertise your business in its mailings for two months at no cost and asks you to cut your Glacier price for this one event to $3.00 in exchange for the free advertising. You have no other 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 Glaciers on this one day at Octoberfest. Do you accept Park Lane Reno's special price offer? Why or why not? Support your answer PART 3: BUDGETING FOR A GLACIER BUSINESS Now assume the Glacier supplier increases the cost of a gallon of the Glacier syrup to 58.00 (from its original cost of $4.25). In response, you increase the selling price of a large Glacier to $5.00. REQUIREMENTS 1. Make the following assumptions (for items (a) through (c), re-use your assumptions from Part 1): a. Number of days you anticipate opening the Glacier 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 Glacier kiosk per day d. How many Glaciers 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 secumptions 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 Glacier business? $0.20 COSTS All listed costs relate to the large size Glacier Ice per Glacier Spoon straw (need one per Glacier) Styrofoam rinneer one per Glacier) Napkin per sheet (need two per Glacier) $0.02 $n na $0.01 Servings per gallon of syrup 28 Cost per gallon of syrup (includes concentrate, preservative, and sugar) 54.25 Hourly rate for workers $10.00 Event registration fee per day $25.00 Electricity, insurance, maintenance, and permit costs per month $250.00 Kiosk rental per month $650.00 Purchase cost of two ice shavers (five-year life $3,180.00 Purchase cost of a flavor station (five-year life) $1,080.00 Part 1: Cost-Volume-Profit Analysis for a Glacier Kiosk Assume that you are evaluating whether to start a Glacier 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 space, work area, electrical outlets, lighting, and a water system. The flavored shaved ice, a "Glacier" (or snow cone), is normally offered in three sizes. For this case, we are going to assume that only one size is offered - the 20 oz. size. This large Glacier sells for $4.00. See Table for a list of all costs related to a large-size Glacier. Manufacturing and Other Costs Variable Costs Per Unit Direct materials Ice per Glacier $ Spoon straw (need one per Glacier) $ Styrofoam cup (need one per Glacier) $ Napkin per sheet (need two per Glacier) $ Cost per gallon of syrup (includes concentrate, preservative, and su $ Direct labor $ 0.20 0.02 0.08 0.01 0.15 Daily Unit Monthly 20 Type a. Requirements 1. Specify your assumptions about the following items: Number of days you anticipate opening the Glacier 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 Glacier kiosk per day 2. Is the cost of syrup a variable or fixed cost with respect to the number of Glaciers sold? Explain your answer. What is the cost of syrup per Glacier? (Use four decimal places in your response and all calculations for this question.) 5 8 160 Variable Other overhead Total Variable Manufacturing Costs Per Unit $ $ 0.4618 $ 0.1518 3. Fixed $ 0.46 1,600 Is the cost of the worker attending the kiosk a variable or fixed cost with respect to the number of Glaciers sold? Explain your answer. What is the cost of the worker's wages per day and per month? $ 80.00 $ What is the total variable cost per Glacier (per cup)? (Use four decimal places in your response and all calculations for this question.) What is the total fixed cost per month to operate the Glacier business? $ Calculate the number of Glaciers that you need to sell each month to break even. How many Glaciers must be sold to achieve an operating profit of $2,000 per month (before tax)? Think about the break even and target profit quantities you just calculated. Do you think these quantities are realistic? Discuss and support your answer. 5,231 S 4 5. 6. 7. 8. 1,600 1478.4294 2043.6863 $ $ 3,180 1,080 Total Variable Costs Per Unit Fixed Costs per month Labor Wages per month Machinery Purchase cost of two ice shavers (five-year life) Purchase cost of a flavor station (five-year life) Electricity Electricity, insurance, maintenance, and permit costs per month Rent Kiosk rental per month Event Registration Fee Depreciation (straightline) Two ice shavers Flavor Station Total Fixed Manufacturing Costs 250 $ $ $ 650 $ $ $ 53 18 5,231 $ $ 5,231 Selling and Administrative Total Fixed Costs per month Other Relevant Information Selling price per unit Hourly rate for workers Event registration fee per day Number of Days Event Registration Required Cost per gallon of syrup (includes concentrate, preservative, and sugar) Servings per gallon of syrup $ $ $ 4.00 10.00 25 20 4.25 28 $ PART 2: SPECIAL-ORDER PRICING FOR A GLACIER EVENT Assume that Park Lane Reno, an organization that hosts outdoor events in downtown Reno, approaches you about bringing your Glacier kiosk to the Octoberfest in Reno for one day in October. Park Lane Reno will provide the rups for the event that are brander with the Rena Orto herfest Inen, sn you will not have any run rasts for this event. Park Lane Reno will also not be charging you a registration fee for this event. Park Lane Reno will allow you to advertise your business in its mailings for two months at no cost and asks you to cut your Glacier price for this one event to $3.00 in exchange for the free advertising. You have no other 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 Glaciers on this one day at Octoberfest. Do you accept Park Lane Reno's special price offer? Why or why not? Support your answer PART 3: BUDGETING FOR A GLACIER BUSINESS Now assume the Glacier supplier increases the cost of a gallon of the Glacier syrup to 58.00 (from its original cost of $4.25). In response, you increase the selling price of a large Glacier to $5.00. REQUIREMENTS 1. Make the following assumptions (for items (a) through (c), re-use your assumptions from Part 1): a. Number of days you anticipate opening the Glacier 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 Glacier kiosk per day d. How many Glaciers 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 secumptions 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 Glacier business? $0.20 COSTS All listed costs relate to the large size Glacier Ice per Glacier Spoon straw (need one per Glacier) Styrofoam rinneer one per Glacier) Napkin per sheet (need two per Glacier) $0.02 $n na $0.01 Servings per gallon of syrup 28 Cost per gallon of syrup (includes concentrate, preservative, and sugar) 54.25 Hourly rate for workers $10.00 Event registration fee per day $25.00 Electricity, insurance, maintenance, and permit costs per month $250.00 Kiosk rental per month $650.00 Purchase cost of two ice shavers (five-year life $3,180.00 Purchase cost of a flavor station (five-year life) $1,080.00 Part 1: Cost-Volume-Profit Analysis for a Glacier Kiosk Assume that you are evaluating whether to start a Glacier 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 space, work area, electrical outlets, lighting, and a water system. The flavored shaved ice, a "Glacier" (or snow cone), is normally offered in three sizes. For this case, we are going to assume that only one size is offered - the 20 oz. size. This large Glacier sells for $4.00. See Table for a list of all costs related to a large-size Glacier. Manufacturing and Other Costs Variable Costs Per Unit Direct materials Ice per Glacier $ Spoon straw (need one per Glacier) $ Styrofoam cup (need one per Glacier) $ Napkin per sheet (need two per Glacier) $ Cost per gallon of syrup (includes concentrate, preservative, and su $ Direct labor $ 0.20 0.02 0.08 0.01 0.15 Daily Unit Monthly 20 Type a. Requirements 1. Specify your assumptions about the following items: Number of days you anticipate opening the Glacier 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 Glacier kiosk per day 2. Is the cost of syrup a variable or fixed cost with respect to the number of Glaciers sold? Explain your answer. What is the cost of syrup per Glacier? (Use four decimal places in your response and all calculations for this question.) 5 8 160 Variable Other overhead Total Variable Manufacturing Costs Per Unit $ $ 0.4618 $ 0.1518 3. Fixed $ 0.46 1,600 Is the cost of the worker attending the kiosk a variable or fixed cost with respect to the number of Glaciers sold? Explain your answer. What is the cost of the worker's wages per day and per month? $ 80.00 $ What is the total variable cost per Glacier (per cup)? (Use four decimal places in your response and all calculations for this question.) What is the total fixed cost per month to operate the Glacier business? $ Calculate the number of Glaciers that you need to sell each month to break even. How many Glaciers must be sold to achieve an operating profit of $2,000 per month (before tax)? Think about the break even and target profit quantities you just calculated. Do you think these quantities are realistic? Discuss and support your answer. 5,231 S 4 5. 6. 7. 8. 1,600 1478.4294 2043.6863 $ $ 3,180 1,080 Total Variable Costs Per Unit Fixed Costs per month Labor Wages per month Machinery Purchase cost of two ice shavers (five-year life) Purchase cost of a flavor station (five-year life) Electricity Electricity, insurance, maintenance, and permit costs per month Rent Kiosk rental per month Event Registration Fee Depreciation (straightline) Two ice shavers Flavor Station Total Fixed Manufacturing Costs 250 $ $ $ 650 $ $ $ 53 18 5,231 $ $ 5,231 Selling and Administrative Total Fixed Costs per month Other Relevant Information Selling price per unit Hourly rate for workers Event registration fee per day Number of Days Event Registration Required Cost per gallon of syrup (includes concentrate, preservative, and sugar) Servings per gallon of syrup $ $ $ 4.00 10.00 25 20 4.25 28 $