Question 2.

Below is a hypothetical income statement, based on the income statement of Starbucks, Inc.[1] in 2019, 2018, and 2017

Item 8.

Financial Statements and Supplementary Data

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS (INCOME STATEMENT)

(in millions)

Fiscal Year Ended Sep 29, 2019Sep 30, 2018Oct 1, 2017

Revenue (Sales Volume) 22,386

Cost of Goods Sold (COGS) 7,065

Operating expenses 10,494 9,472 8,486

Depreciation and amortization expenses1,377 1,247 1,011

Interest expense 331 170 92

Income tax expense 871 1,262 1,432

Answer all the questions below.

Question 2a. Let's assume that the ratio (percentage) of the COGS to its Revenue (Sales Volume) of Starbucks hasn't changed in 2017, 2018, and 2019.If so, in order to break-even, what is the COGS and projected Revenue (Sales Volume) in 2018 and 2019?Show your calculations below, and fill in the Summary Table.Note that the numbers above are in millions.

(I wanted to clarify Question 2A

This question is asking for the "projection" of COGS and Sales Volume of 2018 and 2019, and it is asking for these projections to at least "break-even."

Note that you are using the same ratio (percentage) of COGS to Sales Volume and applying it to years 2018 and 2019.)

Calculations:

Summary Table

20192018

Revenue (Sales Volume)

Cost of Goods Sold (COGS)

[1] https://investor.starbucks.com/financial-data/sec-filings/default.aspx

Question 2b. Break-even point question. If there were 31,256 Starbucks stores world-wide in 2019, how many cups of coffee did a Starbuck store need to sell in a week to break even? Assume that Starbucks only product is a cup of coffee (one size), all stores are the same in size and sales, and the price of a cup of coffee is equally priced at $5 a cup in 2019. Note that the numbers above are in millions.

[1] https://investor.starbucks.com/financial-data/sec-filings/default.aspx

Question 2c. Based on the income statement above (Item 8), what is the gross profit, gross profit margin, net profit, net profit margin in 2019, 2018, and 2017? Show your calculations below, and then fill in the summary table below. Note that the numbers above are in millions.

Calculations:

Summary Table

201920182017

Gross profit

Gross profit margin

Net profit

Net profit margin

Question 2d: Based on your answers to Question 1, how is Starbucks doing in terms of their sales in 2019 and in terms of their operations in 2019? Make sure that your explanation includes what you have found in the Summary Table, and also make a comparison across the three years.

Question 2e: Based on your answers to Question 3, what should Starbucks be doing in the next 5 years? What would be a good strategy to achieve what they should be doing for the next 5 years?

Question 3

Below is a list of annual financial information for a hypothetical lemon juice start-up business.

Advertising - $3,000

Administrative salaries and wages - $5,000

Bank charges - $200

Charitable contributions - $100

Depreciation expense - $650

Insurance - $2,000

Interest expense (loans, credit cards, etc.) - $250

Maintenance contracts - $600

Office supplies - $310

Payroll taxes - $2,600

City & state taxes - $200

Permits and licenses - $70

Postage and delivery expense - $300

Rent expense - $8,000

Repairs (office equipment, etc.) - $500

Utilities (electricity, water sewage) - $3,000

Answer all the questions below.

Question 3a: Calculate the annual sales estimate based on the information above. Assume that the cost of goods sold (COGS) is 55% of the total annual sales volume of the business. Show your calculations below.

Calculations:

Annual sales estimate:

Question 3b: Given your answer above, what would be a reasonable price point for a glass of lemonade? Why is the price point reasonable (provide evidence for your support)? You can use external sources of information. HINT: show many glasses of lemonade the business needs to sell in a day with your price point.

Question 2. and sales, and the price of a cup of coffee is equally priced at $5 a cup in 2019. Note that the Below is a hypothetical income statement, based on the income statement of Starbucks, Inc. in numbers above are in mullions. 2019, 2018, and 2017 Question 3 Below is a list of animal financial information for a hypothetical lemon juice start-up business. Item S Financial Some Question 2c. Based on the income statement above (Item 8), what is the gross profit, gross profit margin, net profit, net profit margin in 2019, 2018, and 2017? Show your calculations below, and STARBUCKS CORPORATION then fill in the summary table below. Note that the numbers above are in millions. Advertising $3,000 CONSOLIDATED STATEMENTS OF EARNINGS (INCOME STATEMENT) Calculations Administrative salaries and wages $5,000 Bank charges $ 200 Charitable contribution $100 Depreciation expense Insurance $2,000 Summary Table Interest experise [loans, credit cards, etc.) $250 Fiscal Year Ended Maintenance contracts $600 Revenue (Sales Volume) 22386 2019 2018 2017 Office supplies $310 Cost of Goods Sold (COGS 7,065 Gross profit Payroll taxes $2.600 Operating expenses 10 40 9,472 8,486 Gross profit margin City & state taxes $200 Depreciation and sw 137 1.247 1011 Net profit Permits and licenses $70 terest expense 331 170 92 Net profit margin Postage and delivery expense $300 Income tax expense $71 1.262 1,432 Rent expense $8,00 Repairs (office equipment, ett.) $500 Question 2d: Based on your answers to Question ], how is Starbucks doing in terms of their Utilities (electricity, water sewage $3.000 Answer all the questions below sales in 2019 and in terms of their operations in 2019? Make sure that your explanation includes Question 2a. Let's assume that the ratio (percentage) of the COGS to its Revenue (Sales what you have found in the Summary Table, and also make a comparison across the three years. Volume) of Starbucks hasn't changed in 2017, 2018, and 2019_ If so, what is the COGS and (2-3 paragraphs) Answer all the questions below. Revame in 2018 and 2019? Show your calculations below and fill in the Summary Table Note that the rambers shove are in Millions. Question 2e: Based on your answers to Question 3, what should Starbucks be doing in the next 5 Calculations Question 32: Calculate the annual sales estimate based on the information above. Assume that years? What would be a good strategy to achieve what they should be doing for the next 5 years? the cost of goods sold (COGS) is 55% of the total annual sales volume of the business. Show (2-3 paragraphs) your calculations below. Calculations: Summary Table 2019 2018 Annual sales estimate: Revame (Sales Volume) Cost of Goods Sold (COGS Question 3b. Given your answer above, what would be a reasonable price point for a glass of Question 2b. Break even point question. If there were 31,256 Starbucks stores world wide in lemonade? Why is the price point reasonable (provide evidence for your support)? You can use external sources of information. (1-2 paragraphs) HINT: show many glasses of lemonade the 2019, how many cups of coffee did a Starbuck store need to sell in a week to break even? Assume that Starbucks only product is a cup of coffee (one size), all stores are the same in size business needs to sell in a day with your price point. BONUS