The Green Tea Place (GTP) is a local caf chain in Vancouver, British Columbia, founded by Victor and Lucie Stone. GTPs reputation was built around the caf business; however, GTP also owns a small manufacturing plant that produces sustainably-sourced bottled teas. The couple wanted to provide the community with organic teas while acting responsibly toward the environment. The Stones have just retired, passing the business on to their daughter, Aurora, who shares a similar commitment to the environment and her community. It is May 2022 and you, CPA, work as an independent consultant. You have been approached by Aurora, who would like your advice on some of her recent initiatives and ideas. In 2020, GTP started to capitalize on the growing demand for Kombucha a fermented tea drink thats supposed to offer several health benefits by producing and selling its own fresh, bottled Kombucha. This year, Aurora started offering Kombucha-making classes to GTPs customers. Based on the response from customers, Aurora thinks the Kombucha classes have been a massive success, but she would like to know what class size she needs to break even, and to earn a target pre-tax profit of $200 per class. Aurora also wants to know what price she needs to charge in order to earn her target profit and would appreciate a discussion of any qualitative impacts of setting a target profit (Appendix I). Aurora has noticed that the popularity of bottled Kombucha and Yerba Mate, an herbal tea, have increased dramatically over the past two years. Because of its fermentation process, Kombucha takes longer to produce and requires more space than GTPs other bottled teas. Aurora has been approached by a local company, Tea4U, who offered to produce the bottled Kombucha for GTP for $7.80 per bottle. Tea4U produces and supplies high-quality bottled teas to GTPs cafs and to other small distributors, and can produce more bottles than GTP currently produces. Although the company has only been in operation for two years, Tea4U is growing rapidly and is known for its quality products. If GTP outsources the Kombucha production to Tea4U, it will have to share its proprietary recipe with Tea4U. Aurora wonders if she should outsource bottled Kombucha to Tea4U and use the resulting production capacity to start producing Yerba Mate tea instead (Appendix II). Aurora has recently been approached about partnering with Organic Essentials Inc. (OEI), a large company based in Vancouver that sells essential oils. She would like you to analyze this opportunity and tell her if this is a good fit for GTP (Appendix III).

APPENDIX I KOMBUCHA-MAKING CLASSES GTP offers Kombucha-making classes at its manufacturing plant on weekend mornings. Each class holds 20 students, who pay $25 each, and the classes are always full. Aurora pays a local Kombucha maker $250 to teach each class. Students are provided with ingredients to make a sample of Kombucha (cost of $3 per student) and a small recipe book to take home (cost of $4 per student). Each student may also purchase one take home starter kit at a discounted price of $35, which is $5 above cost. These kits are normally sold in the cafs for $60. Aurora estimates that about 50% of students buy the kit. She wonders how the sales of starter kits is impacting her pricing strategy.

APPENDIX II KOMBUCHA OUTSOURCING AND YERBA MATE PRODUCTION Financial details of current Kombucha production 1Tea4Us price includes the packaging coGTP but not the shipping coGTP. 2 Tea4U has sufficient capacity to deliver 2,500 bottles per month. If GTP decides to outsource Kombucha production to Tea4U, it can use the vacant space to produce an additional 3,000 bottles of Yerba Mate per month. Financial details of Yerba Mate production

APPENDIX III ORGANIC ESSENTIALS INC. (OEI) One of Auroras friends recently started working for OEI. OEI commercialized the sale of essential oils by successfully finding the cheapest and most efficient way to harvest and extract essential oils from plants and flowers located all over the world. Auroras friend told her that market studies have shown that those who enjoy organic tea are more likely to also have an interest in essential oils; therefore, she thinks GTP and OEI would make a perfect partnership. Aurora has never tried OEIs products but, given the companys rapid growth, notes that they seem popular. As all OEI products are sold on consignment, there would be no cost to GTP. OEI would send sales agents to GTPs cafs to distribute free samples to customers and talk to them about the benefits of the products. Aurora thinks this might be one way to diversify GTPs product offerings, which currently consist of tea and Kombucha. OEI was recently reported in the media as having caused extensive environmental damage in the countries where their essential oils are extracted. In the past, there have also been rumours that OEIs manufacturing facilities abroad are not well maintained, and its employees are treated poorly