The case assumes students will open a milkshake shack on the beach of Muscat. A unique feature of my milkshakes is that I will serve them with flavored straws that match the flavor of the chosen milkshakes by customers. My research embeds the following assumptions:

Sales prices of milkshakes ($7.00 for small, and $10.00 for large)

Cost of materials needed to make milkshakes:

DIRECT MATERIAL INGREDIENTS	Small (8 oz. size)	Large (12 oz. size)
Whole Milk ($15 for a 5 gallon=740 oz.)	(need 2 oz. of milk)	(need 3 oz. of milk)
Cream ($20 for 1 gallon=128 oz.)	(need 2 oz. of cream)	(need 3 oz. of cream)
Sugar ($10 for a 15 lb. bag=30 cups)	(need 54 cup of sugar)	(need % cup of sugar)
Premium Vanilla Ice Cream ($24 for 600 oz.)	(need 6 oz.)	(need 9 oz. of cream)
Flavorings	.25 per shake	.40 per shake
Flavored specialty straws	.75 per straw	.75 per straw
Cups (500 8 oz. cups @ a cost of $200)
Cups (500 12 oz. cups @ a cost of $250) .................................

Fixed costs:

Shack rental: $500 a month

Cleaning and other miscellaneous supplies: $100 a month

Equipment: Industrial Milk Shake Maker: $72 per machine x 10 machines=$720

Equipment: Industrial Refrigerator/freezer: $480

Countertops: $1,200

Tables and benches for customers to sit outside: $108 per bench-set x 10=$1,080

Annual insurance: $600 a year

Sign: use your marketing knowledge to think of a good name= $100

Total Fixed Costs = $4,780 for which students are assumed to take out a non-owner loan. A self- amortizing loan is assumed to be obtained from a bank, and carries an annual interest rate of 6% payable over 2 years with monthly payments (each monthly payment consists of both principal and interest).

Employees:

Two part-time employees: with each receiving a monthly salary of $800 per month (including taxes and benefits).

Other costs:

10% of gross sales must be given to resort where shack will be located on its premises.

Owner’s capital will be used to cover direct materials’ costs.

REQUIREMENTS OF THE CASE

In order to answer the questions below, you will need to make assumptions, and add/change fixed and variable costs (please clearly indicate all assumptions made).

1- Using the above information, determine the number of milkshakes you will need to sell to break even. In order to do this, you will need to set a sales price as well as classify the above costs into fixed or variable. (Hint: keep all costs on either a weekly, monthly or yearly basis throughout your analysis).

2- Now build-in a salary for yourself, and determine the amount of milkshakes you will need to sell to break even.

3- Should you leave your job to open the milkshake shack?