Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBc). Brewpubs provide two prodcs customers food from the

image text in transcribed
image text in transcribed
image text in transcribed
Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBc). Brewpubs provide two prodcs customers food from the restaurant segment and freshly brewed beer from the beer production segment. Both segments are typically in the same building. which After months of research, the owners created a financial model that showed the following projections for the first year of operations Sales Beer sales Food sales Other sales $ 871,200 1,108,800 Total sales $1.980,000 459.360 Less cost of sales Gross margin Less marketing and administrative expenses 1035 400 s 485,240 Operating profit In the process of pursuing capital through private of the more common questions asked e investors and financial institutions. RBC was approached with several questions. The following represents a sample What is the break-even point? . What sales dollars will be required to make $150,000? To make $560,000 s the product mix reasonable? (Beer tends to have a higher contibution margin ratio than food, and therefore product mix assumptions are critical to prom projections.) what happens to operating pront if the product mix shits? How will changes in price affect operating profit? How much does a pint of beer cost to produce? it became clear to the owners of RBC that the initial financial model was not adequate for answering these types of questions Ater further research, RBC created another financial model that provided the following information for the first year of operations Sales Beer sales (44% of total sales) Food sales (56% of total sales) Other sales (0% of total sales) $ 871,200 1,108,800 Total sales Variable Costs Beer ( 12% of beer sales) Food (32% of food sales) Other (30% of other sales) Wages of employees (21% of sales) Supplies (2% of sales) Utilities (3% of sales) Other credit card, misc. (2% of sales) $1,980.000 S 104,544 354,816 415,800 39,600 59.400 Total variable costs Contribution margirn Fixed Costs Salaries manager, chef, brewer Maintenance Advertising Other cleaning, menus, misc Insurance and accounting Property taxes 1,013.760 s 132,000 21,000 17.000 33,000 34,000 24.000 93,000 127.000 reciation Total fixed costs Operating profit Debt service (interest on debt S 481 000 $485.240 Required: .Perform a sensitivity analysis by answering the following questions 1. What is the break-even point in sales dollars for RBC? (Round intermediate calculations to 3 decimal places and your final answer to the nearest whole dollar) 2. What is the margin of safety tor RBC? (Round intermediate calculations to 3 decimal places and your tinal answer to the nearest whole dollar) 4. what sales dollars would be required to achieve an operating pront of $150.0007 $560,000? (Round intermediate calculations to 3 decimal places and yo final answers to the nearest whole dollar.) Operating profit of $150,000 Operating profit of $560,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information Systems

Authors: George H. Bodnar, William S. Hopwood

8th Edition

0130861774, 9780130861771

More Books

Students also viewed these Accounting questions

Question

Why is Equation (23-5) an approximate equation?

Answered: 1 week ago