Question
The Great Tamale Alternative 1- Food Truck After experiencing such great success with their food cart, Nathan and Cody are considering purchasing a food truck
The Great Tamale Alternative 1- Food Truck After experiencing such great success with their food cart, Nathan and Cody are considering purchasing a food truck to serve other communities. This would allow the Great Tamale, GT, to reach even more customers in different geographic locations. There would be an increase in the selling price per plate. There will also be an increase in the fixed costs of $30,000 for advertising to inform the public of this change (this amount is already included below under Food Truck data). The financial information is presented below for this alternative as well as the original data. Assume 31,125 plates are sold for the food cart and 45,625 plates are sold for the food truck.
food cart | food truck | |
Sales | $ 217,875.00 | $365,000.00 |
Variable cost | $46,687.50 | $103,437.50 |
Contribution marigin | 171,187.50 | 261,562.50 |
fixed cost | 90,000.00 | 147,500.00 |
income before taxes | 81,187.50 | 114,062.50 |
Income taxes (32% rate) | 25,980.00 | 36,500.00 |
net income | 55,207.50 | 77,562.50 |
Compute the Profit Margin and Return on Assets for each scenario assuming average total assets of $500,000. Industry averages are 20% and 10% respectively.
Show work please. thank you
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