Riccardo is planning to open a food van business in your location *, which will sell strudels prepared with fresh, local ingredients. These will come in three savoury varieties: vegetarian, chicken, or beef, and three smaller sweet varieties: apple, berry, or hazelnut spread. Riccardo plans to use environmentally friendly packaging to project a the fresh, green, and local image. The business will operate only eight months per year, i.e. October to April inclusive. During those months, the van will be open from 4pm to 8pm, 4 days a week, Thursday to Sunday.

Riccardo has two options: to hire an existing food van or purchase a new one. If he goes with the first option, he expects the cost to rent a van will be approximately $300 per week during the operating season. If he goes with the second option, he envisages financing the purchase cost of the van and fit out (total cost $48,000) with a bank loan. The fittings in the purchased van, valued at $8,000, will need to be replaced at 5-yearly intervals.

Sales will vary with seasonal weather minimum sales expected for October are:

	Savoury	Sweet	Total
Sales (unit)	3,000	3,000	6,000

The sales are expected to increase 5% per month up to and including February then the drop 8% per month towards the end of the season.

Irrespective of the option he finally chooses, Riccardo plans to prepare all the food. He estimates the ingredients for the savoury will cost around $3.00 each and the sweet around $2.00 each. He expects the savoury strudels will sell for between $7-$10 each, and the sweet for $4 - $6. He is initially offering the strudels as individual serves, but he is considering offering packs of three savoury or three sweet at a reduced rate, he predicts this could increase his sales overall by 15%. He anticipates that 60% of the sales will be packs of three. He needs advice on the pricing of the individual products given that he aims to make an annual profit, before tax, of at least $60,000. He would also like you to recommend a discount price for the packs of three.

Riccardo intends to hire 2 part-time staff, to work with him in the van during opening hours. They will be paid an hourly rate, while Riccardo, as manager, will draw a monthly wage of $4,000. He has not investigated the wages costs, or the other costs associated with running a food van business.

Riccardo is also considering installing a coffee machine in the van at additional cost of $6,000, to be financed by a bank overdraft. He plans to initially sell only a regular size coffee estimating the sale of 3,600 units per month. The addition of the coffee machine will also require another part-time staff member to work in the van during opening hours. He would like to know the viability of this option separately.

He has now approached you, a highly capable and reputable team of management and cost accountants based in your location. Your team has been chosen because of its excellent reputation, and extensive knowledge of local council regulations.

Riccardo asks you to research the following:

• The requirements for operating a food van in your location,
• whether he should hire a van or purchase a new one
• the financial viability of the proposed project and
• In addition, the viability of adding a coffee machine to the purchased van

You are required to:

1. Use management accounting tools to prepare calculations to assess the options proposed by Riccardo. This could include but is not restricted to:
   1. A projected budget (sales, expenses etc) for the next three years,
   2. Breakeven point, in dollars and units, for the expected sales mix, for the options, or
   3. Calculation of the Payback Period and Net Present Value for Riccardos investment options.

Your calculations should be prepared in an Excel workbook. You are required to use formulae and where appropriate hyperlinks in your worksheets. Take care with your formatting and ensure all worksheets are clearly labelled.

Before starting to develop your Excel workbook, it would help to review a real example of a takeaway business to identify appropriate expenses to include in your calculations. You should also research information about Australian small business to estimate the following: labour, and tax (assuming the business is going to operate as a sole trader), as well as any other costs that will be incurred.

You should prepare a list which explains all external sources of information for your calculations and include this as an appendix to your written report. Also prepare a summary of your calculations to use as an Appendix to your written report.

2. In a written business report, advise Riccardo the outcome of your investigation. If needed copy and paste small tables and diagrams into your written report to support your discussion. Any tables or diagrams should be labelled correctly.

The length of the report is limited to a maximum of 1,500 words, including the executive summary but excluding reference list and appendices.

The report and accompanying spreadsheet will be marked strictly according to the rubric supplied.