QUESTION 1

Des Gateaux is a profitable family bakery business with a long-standing reputation. The business was founded in 1980, Julien Bernard took over the management of the business in 2010 from his father Michel.

Although the business is performing very well, and the products are popular in the locality, Julien realises the business must seek new opportunities. Following some initial research Julien has decided to pursue the idea of opening a snack counter. He already has a vacant premises very close to a school which Julien sees as a good opportunity.

To progress this idea, Julien has decided to keep it quite simple and offer a sandwich & drink combo deal. Based on his research, the tourist trade in the summer should compensate for the school being closed, so monthly sales are expected to be relatively consistent.

As this is a family business, Julien is effectively CEO, marketing and operations manager. However, the analysis needed to determine if the snack counter is viable is beyond his limited accounting experience. He has therefore contacted you, as an employee of Coyne Consulting Ltd., to objectively evaluate the proposed new venture and get back to him with your findings and recommendation.

Julien has provided you with the following year 1 forecast information for your analysis:

Table 1: Snack Counter Feasibility Data

Panel A: Forecasted sales and marketing data

Sandwich & drink combo deal

First year sales volume (units)

80,000

Selling price

4.80

Panel B: Forecasted raw material food costs

Average cost of sandwich fillings

1.88

Average cost of drink

0.40

Average cost of bread

0.25

Panel C: Forecasted additional costs

Packaging costs per sandwich

0.22

Packaging costs per drink

0.34

Salary costsper month

4,800

Sundry expensesper month

1,200

Annualrent of premises

25,000

Advertising expensesper annum

14,000

Panel D: Forecasted chocolate cookie information (relevant for requirements (c) &(d))

Anticipated sales volume (units)

16,000

Selling price per cookie

0.95

Raw material cost per cookie

0.10

Packaging costs per cookie

0.10

Requirement:

make a statement for the first 12 months of the business setting out the expected total revenue, total contribution and total profit. Ignore the option of selling cookies (Panel D). Note: It is not required to show this on a month by month basis.