Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC). Brewpubs provide two products to customers-food from the restaurant segment and freshly brewed beer from the beer production segment. Both segments are typically in the same building, which allows customers to see the beer-brewing process. 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 Total sales Less cost of sales Gross margin Less marketing and administrative expenses Operating profit $ 815,900 955, 200 218,900 $1,990,000 503,868 $1,486,132 1,129,800 $ 356,332 Sales Beer sales (41% of total sales) Food sales (48% of total sales) Other sales (11% of total sales) Total sales Variable Costs Beer (13% of beer sales) Food (35% of food sales) Other (29% of other sales) Wages of employees (25% of sales) Supplies (2% of sales) Utilities (4% of sales) Other: credit card, misc. (1% of sales) $815,900 955,200 218,900 $1,990,000 $106,067 334,320 63,481 497,500 39,800 79,600 19,900 Total variable costs Contribution margin Fixed Costs Salaries: manager, chef, brewer Maintenance $1,140,668 849,332 $ $138,000 29,000 Advertising Other: cleaning, menus, misc Insurance and accounting Property taxes Depreciation Total fixed costs Operating profit 14,000 40,000 34,000 18,000 89,000 Debt service (interest on debt) 131,000 $ 493,000 $ 356,332