Question
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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