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Task #1 Below is the most recent annual financial statement for Misfitz: Misfitz Inc. Statement of operations For the year ending December 31 Storefront Ice

Task #1

Below is the most recent annual financial statement for Misfitz:

Misfitz Inc.

Statement of operations

For the year ending December 31

Storefront Ice cream trucks Total

Sales $1,426,000 $ 940,000 $2,366,000

Variable expenses 713,000 470,000 1,183,000

Contribution margin 713,000 470,000 1,183,000

Advertising 25,000 2,000 27,000

Rent 150,000 150,000

Utilities 17,000 12,000 29,000

Salary and wages 350,000 135,000 485,000

Depreciation 55,000 24,000 79,000

Operating income 116,000 297,000 413,000

Taxes 29,000 74,250 103,250

Net income $ 87,000 $ 222,750 $ 309.750

In the event that the storefront location closes, the Pines think the equipment will be

sold to a competitor for $20,000, net of taxes and disposition costs.

The current lease includes two parking spots that are used by the ice cream trucks.

Each spot would continue to be leased at a rate of $6,000 annually. The current

advertising budget benefits both the storefront and the ice cream trucks. If the storefront

is closed, the Pines expect the ice cream trucks' advertising budget to be increased to

$13,000.

The Pines would require that even with the closure they maintain their current salary of

$100,000 each. The other employees in the storefront would be laid off.

Lastly, in the storefront location, each year they cater several events over the winter

holiday season. This would continue with the use of the trucks, which are not normally

in service at that time. The revenues on these sales are $250,000, and it is expected

this will incur additional utilities of $500.

The Pines would like to understand the cash flow impact over the next five years if they

choose to close the storefront.

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