Twelve months ago, David opened a coffee shop, The (the first year of operations. Fringe benefits for David, Daily Grind, in Mercy Hospieal's former gift shop. including health insurance and payroll taxes, accounted David was confident that he had the knowledge to make for an additional $10,000 of costs for the company. a success of this new business. He produced a quality Part-time employees work an average of 24 hours product that people needed, had priced the product each week and are paid $9 per hour. Payroll taxes and to be very competitive, and had a great location in a other costs average about $1.00 per hour for parthigh-traffic area of the hospital. time employees. As shown in the following table, parttime employees worked from 656 hours to 727 hours each month: Witerial bosts F he Daily Grind uses a specialty brand of Kona coffee beans costing $8 per pound. Each pound of coffee beans produces 256 ounces of coffee. Coffee is sold in three sizes: a small cup holding 8 ounces, a medium cup holding 12 ounces, and a large cup hold. ing 16 ounces. The cups needed to serve the coffee cost $.05 for the small cup, $.06 for the medium cup, and $.07 for the large cup. Lids cost $.03 per cup and are the sime regardless of cup size. Sleeves cost an additional $.04 per cup. Onaveragc, sugar and cream cost $.02 per cup for small cups, 5.03 for medium cups, and $.04 for large cups. Lahor Bosts F. he Daily Grind is open 12 hours each day, 7 days Iightaen fisis three employees during the morning shift (7:00-11:00), two employees from 11:00 until 3:00, and three emuring the first year of operations, the hospital ployees from 3:00 to 7:00. Labor is a fixed cost, becharged rent of $2,000 per month. As part of cause the employees are paid regardless of whether the rental cost, the hospital provided furniture and fixcoffee is sold. David worked 60 hours each week, tures for the shop, as well as nightly cleaning services. on average, and was paid a satlary of $30,000 during David leased a drip coffeemaker, refrigerator, coffee grinder, scale, and cash register for $150 per month, total. David paid directly for his utilities (electricity and Chapter 6. the electric appliances (refrigerator, coffeemaker, etc.). coffee sold. 2. Calculate the cost of cups, lids, sleeves, cream, and sugar per unit for small, medium, and large cups of coffee and in total. 3. Calculate the total labor costs for the year. 4. Prepare an income statement for The Daily Grind for the last year. You can assume that there are no inventories on hand at the end of the year. (All coffee and supplies purchased during the year are consumed.) 5. Determine whether the costs incurred by The Daily Grind are fixed, variable (with respect to number of cups of coffee sold), or mixed. G. Use regression analysis and the high/low Selling and Administratiug Gosts method to calculate the monthly fixed cost and the variable component of the utility expenses incurred by The Daily Grind. Use cups of coffec sold as the independent variable and utility expense as the dependent variable in your regression analysis. After calculating both numbers, round your final answers to two decimal places. Sales Revenue 7. Compare the regression results with the high/low results. Which modet would you suggest? prices to be slightly lowar than their comperitors'. The 8. Calculate the contribution margin earned for Daily Grind sells a small cup of coffec for $1.25, a medium cup for $1.65, and a large cup for $1.95. Sales Aswine esch product (round to three decimal places) revenue was as follows: dtilies" and the weighted-axerage contribution margin cup instead of $.04 per cup. The new extra-large cup would be priced at \$2.40. David anticipates that the new sales mix would be 50% for the 12-ounce cup, 30% for the 16-ounce cup, and 20% for the new 20-ounce cup. Assume that "Coftee saies weroge 10% snall cups (b) cuncesh, 50\% madium aps material, labor, and overhead costs remain the (12 ouncex), and 40 is lugge aps (16 ocnoes). 310 Appendix 8: The Daily Grind \begin{tabular}{l|l} change in sales mix affect the company's break- & increasing the number of hours worked by part- \\ time employees by 1,080 hours per year. Acsume \end{tabular} same in the upcoming year. How would this even point? the introduction of the extra-large cup and the 11. David would like to increase sales in the second new sales mix as discussed in requirement 10. What level of annual sales would be required in year of operations so that he may raise his salorder for David to reach his goal? ary to $50,000 (not including $15,000 of fringe bencfits) while reducing his workload to 40 hours 12. Write a short memo to David and discuss per week with two paid wecks of vacation durwhether you think he will be able to reach his ing the yeas. Reducing his workload will require goal during the second year of operations. cup instead of $.04 per cup. The new extra-large cup would be priced at \$2.40. David anticipates that the new sales mix would be 50% for the 12-ounce cup, 30% for the 16-ounce cup, and 20% for the new 20-ounce cup. Assume that material, labor, and overhead costs remain the (12 ouncenl, and 40 is luge aps (16 ocnoes). 310 Appendix 8: The Daily Grind same in the upcoming year. How would this increasing the number of hours worked by partchange in sales mix affect the company's breaktime employees by 1,080 hours per year Assume even point? the introduction of the extra-large cup and the 11. David would like to increase sales in the second new sales mix as discussed in requirement 10 . What level of annual sales would be required in year of operations so that he may raise his salorder for David to reach his goal? ary to $50,000 (not including $15,000 of fringe bencfits) while reducing his workload to 40 hours 12. Write a short memo to David and discuss per week with two paid weeks of vacation durwhether you think he will be able to reach his ing the year, Reducing his workload will require goal during the sccond year of operitions. 1. Calculate the cost of coffee beans per ounce of coffee sold. 2. Calculate the cost of cups, lids, sleeves, cream, and sugar per unit for small, medium, and large cups of coffee and in total. 3. Calculate the total labor costs for the yeaz. 4. Prepare an income statement for The Daily Grind for the last year, You can assume that there are no inventories on hand at the end of the year. (All coffee and supplies purchased during the year are consumed.) 5. Determine whether the costs incurred by The Daily Grind are fixed, variable (with respect to number of cups of coffee sold), or mixed. 6. Use regression analysis and the highlow method to calculate the monthly fixed cost and the variable component of the utility expenses incurred by The Daily Grind. Use cups of coffee sold as the independent variable and utility expense as the dependent variable in your regression analysis. After calculating both numbers, round your final answers to two decimal places. 7. Compare the regression results with the high/low results. Which model would you suggest? 8. Calculate the contribution margin earned for l cup of coffee for $1.25, a meAd a large cup for $1.95. Sales Assoneeachproduct(roundtothreedecimalplaces)tilitesandtheweighted-averagecontributionmargin Sales in Cups of Coffee 44/cop2 (round to four decimal places). 9. Assume the sales mix given in the problem. 9,300 cups What is Daily Grind's break-even point in 1. Calculate the cost of coffee beans per ounce of coffee sold. 2. Calculate the cost of cups, lids, sleeves, cream, and sugar per unit for small, medium, and large cups of coffee and in total. 3. Calculate the total labor costs for the yeae. 4. Prepare an income statement for The Daily Grind for the last year, You can assume that there are no inventories on hand at the end of the year. (All coffee and supplies purchased during the year are consumed.) 5. Determine whether the costs incurred by The Daily Grind are fixed, variable (with respect to number of cups of coffee sold), or mixed. 6. Use regression analysis and the highlow method to calculate the monthly fixed cost and the variable component of the utility expenses incurred by The Daily Grind. Use cups of coffee sold as the independent variable and utility expense as the dependent variable in your regression analysis. After calculating both numbers, round your final answers to two decimal places. 7. Compare the regression results with the highflow results. Which model would you suggest? 8. Calculate the contribution margin earned for l cup of coffee for $1.25, a meAs a large cup for $1.95. Sales each product (round to three decimal places) utilites and the weighted-average contribution margin Sales in Cups of Coffee 43/ /0 P (round to four decimal places). 9. Assume the sales mix given in the problem. 9,300 cups: What is Daily Grinds break-even point in aloud expenses incurted by The Dilly Grina USe Sales Revenue 7. Compare the regression results with the highllow During the first year of operations, David set the shop?: results. Which model would you suggest? prices to be slighitly lower than their competitors'. The 8. Calculate the contribution margin earned for Daily Grind sells a small cup of coffee for $1.25,m medium cup for \$1.65, and a large cup for \$1.95. Sales Aw re each product (round to three decimal places) = and the weighted-average contribution margin revenue was as follows: whilies (round to four decimal places). 9. Assume the sales mix given in the problem. What is Daily Grind's break-even point in terms of the number of cups of colfee sold during the year? 10. David is contemplating adding 2 new 20-ounce product for the coming year and discontinuing sales of the small 8-ounce cup. The new cup, lid, and slocre cost the same as the 16-ounce cup, but cream and sugar is expected to cost 5,06 per cup instead of 5.04 per cup. The new extra-large eup would be priced at $2.40. David anticipates that the new sales mix would be 50% for the 12-cunce cup, 30% for the 16-ounce cup, and 20% for the new 20-ounce cup. Assiame that material, laber, and overthead cosss remain the 310 anbenatro e. theopily curef cup instead of $.04 per cup. The new extra-large cup would be priced at \$2.40. David anticipates that the new sales mix woald be 50% for the 12-ounce cup, 30% for the 16-ounce cup, and 20% for the new 20 -ounce cup. Assume that material, labor, and overhead costs remain the 310 Appeadir a. The Daily Grind Twelve months ago, David opened a coffee shop, The (the first year of operations. Fringe benefits for David, Daily Grind, in Mercy Hospieal's former gift shop. including health insurance and payroll taxes, accounted David was confident that he had the knowledge to make for an additional $10,000 of costs for the company. a success of this new business. He produced a quality Part-time employees work an average of 24 hours product that people needed, had priced the product each week and are paid $9 per hour. Payroll taxes and to be very competitive, and had a great location in a other costs average about $1.00 per hour for parthigh-traffic area of the hospital. time employees. As shown in the following table, parttime employees worked from 656 hours to 727 hours each month: Witerial bosts F he Daily Grind uses a specialty brand of Kona coffee beans costing $8 per pound. Each pound of coffee beans produces 256 ounces of coffee. Coffee is sold in three sizes: a small cup holding 8 ounces, a medium cup holding 12 ounces, and a large cup hold. ing 16 ounces. The cups needed to serve the coffee cost $.05 for the small cup, $.06 for the medium cup, and $.07 for the large cup. Lids cost $.03 per cup and are the sime regardless of cup size. Sleeves cost an additional $.04 per cup. Onaveragc, sugar and cream cost $.02 per cup for small cups, 5.03 for medium cups, and $.04 for large cups. Lahor Bosts F. he Daily Grind is open 12 hours each day, 7 days Iightaen fisis three employees during the morning shift (7:00-11:00), two employees from 11:00 until 3:00, and three emuring the first year of operations, the hospital ployees from 3:00 to 7:00. Labor is a fixed cost, becharged rent of $2,000 per month. As part of cause the employees are paid regardless of whether the rental cost, the hospital provided furniture and fixcoffee is sold. David worked 60 hours each week, tures for the shop, as well as nightly cleaning services. on average, and was paid a satlary of $30,000 during David leased a drip coffeemaker, refrigerator, coffee grinder, scale, and cash register for $150 per month, total. David paid directly for his utilities (electricity and Chapter 6. the electric appliances (refrigerator, coffeemaker, etc.). coffee sold. 2. Calculate the cost of cups, lids, sleeves, cream, and sugar per unit for small, medium, and large cups of coffee and in total. 3. Calculate the total labor costs for the year. 4. Prepare an income statement for The Daily Grind for the last year. You can assume that there are no inventories on hand at the end of the year. (All coffee and supplies purchased during the year are consumed.) 5. Determine whether the costs incurred by The Daily Grind are fixed, variable (with respect to number of cups of coffee sold), or mixed. G. Use regression analysis and the high/low Selling and Administratiug Gosts method to calculate the monthly fixed cost and the variable component of the utility expenses incurred by The Daily Grind. Use cups of coffec sold as the independent variable and utility expense as the dependent variable in your regression analysis. After calculating both numbers, round your final answers to two decimal places. Sales Revenue 7. Compare the regression results with the high/low results. Which modet would you suggest? prices to be slightly lowar than their comperitors'. The 8. Calculate the contribution margin earned for Daily Grind sells a small cup of coffec for $1.25, a medium cup for $1.65, and a large cup for $1.95. Sales Aswine esch product (round to three decimal places) revenue was as follows: dtilies" and the weighted-axerage contribution margin cup instead of $.04 per cup. The new extra-large cup would be priced at \$2.40. David anticipates that the new sales mix would be 50% for the 12-ounce cup, 30% for the 16-ounce cup, and 20% for the new 20-ounce cup. Assume that "Coftee saies weroge 10% snall cups (b) cuncesh, 50\% madium aps material, labor, and overhead costs remain the (12 ouncex), and 40 is lugge aps (16 ocnoes). 310 Appendix 8: The Daily Grind \begin{tabular}{l|l} change in sales mix affect the company's break- & increasing the number of hours worked by part- \\ time employees by 1,080 hours per year. Acsume \end{tabular} same in the upcoming year. How would this even point? the introduction of the extra-large cup and the 11. David would like to increase sales in the second new sales mix as discussed in requirement 10. What level of annual sales would be required in year of operations so that he may raise his salorder for David to reach his goal? ary to $50,000 (not including $15,000 of fringe bencfits) while reducing his workload to 40 hours 12. Write a short memo to David and discuss per week with two paid wecks of vacation durwhether you think he will be able to reach his ing the yeas. Reducing his workload will require goal during the second year of operations. cup instead of $.04 per cup. The new extra-large cup would be priced at \$2.40. David anticipates that the new sales mix would be 50% for the 12-ounce cup, 30% for the 16-ounce cup, and 20% for the new 20-ounce cup. Assume that material, labor, and overhead costs remain the (12 ouncenl, and 40 is luge aps (16 ocnoes). 310 Appendix 8: The Daily Grind same in the upcoming year. How would this increasing the number of hours worked by partchange in sales mix affect the company's breaktime employees by 1,080 hours per year Assume even point? the introduction of the extra-large cup and the 11. David would like to increase sales in the second new sales mix as discussed in requirement 10 . What level of annual sales would be required in year of operations so that he may raise his salorder for David to reach his goal? ary to $50,000 (not including $15,000 of fringe bencfits) while reducing his workload to 40 hours 12. Write a short memo to David and discuss per week with two paid weeks of vacation durwhether you think he will be able to reach his ing the year, Reducing his workload will require goal during the sccond year of operitions. 1. Calculate the cost of coffee beans per ounce of coffee sold. 2. Calculate the cost of cups, lids, sleeves, cream, and sugar per unit for small, medium, and large cups of coffee and in total. 3. Calculate the total labor costs for the yeaz. 4. Prepare an income statement for The Daily Grind for the last year, You can assume that there are no inventories on hand at the end of the year. (All coffee and supplies purchased during the year are consumed.) 5. Determine whether the costs incurred by The Daily Grind are fixed, variable (with respect to number of cups of coffee sold), or mixed. 6. Use regression analysis and the highlow method to calculate the monthly fixed cost and the variable component of the utility expenses incurred by The Daily Grind. Use cups of coffee sold as the independent variable and utility expense as the dependent variable in your regression analysis. After calculating both numbers, round your final answers to two decimal places. 7. Compare the regression results with the high/low results. Which model would you suggest? 8. Calculate the contribution margin earned for l cup of coffee for $1.25, a meAd a large cup for $1.95. Sales Assoneeachproduct(roundtothreedecimalplaces)tilitesandtheweighted-averagecontributionmargin Sales in Cups of Coffee 44/cop2 (round to four decimal places). 9. Assume the sales mix given in the problem. 9,300 cups What is Daily Grind's break-even point in 1. Calculate the cost of coffee beans per ounce of coffee sold. 2. Calculate the cost of cups, lids, sleeves, cream, and sugar per unit for small, medium, and large cups of coffee and in total. 3. Calculate the total labor costs for the yeae. 4. Prepare an income statement for The Daily Grind for the last year, You can assume that there are no inventories on hand at the end of the year. (All coffee and supplies purchased during the year are consumed.) 5. Determine whether the costs incurred by The Daily Grind are fixed, variable (with respect to number of cups of coffee sold), or mixed. 6. Use regression analysis and the highlow method to calculate the monthly fixed cost and the variable component of the utility expenses incurred by The Daily Grind. Use cups of coffee sold as the independent variable and utility expense as the dependent variable in your regression analysis. After calculating both numbers, round your final answers to two decimal places. 7. Compare the regression results with the highflow results. Which model would you suggest? 8. Calculate the contribution margin earned for l cup of coffee for $1.25, a meAs a large cup for $1.95. Sales each product (round to three decimal places) utilites and the weighted-average contribution margin Sales in Cups of Coffee 43/ /0 P (round to four decimal places). 9. Assume the sales mix given in the problem. 9,300 cups: What is Daily Grinds break-even point in aloud expenses incurted by The Dilly Grina USe Sales Revenue 7. Compare the regression results with the highllow During the first year of operations, David set the shop?: results. Which model would you suggest? prices to be slighitly lower than their competitors'. The 8. Calculate the contribution margin earned for Daily Grind sells a small cup of coffee for $1.25,m medium cup for \$1.65, and a large cup for \$1.95. Sales Aw re each product (round to three decimal places) = and the weighted-average contribution margin revenue was as follows: whilies (round to four decimal places). 9. Assume the sales mix given in the problem. What is Daily Grind's break-even point in terms of the number of cups of colfee sold during the year? 10. David is contemplating adding 2 new 20-ounce product for the coming year and discontinuing sales of the small 8-ounce cup. The new cup, lid, and slocre cost the same as the 16-ounce cup, but cream and sugar is expected to cost 5,06 per cup instead of 5.04 per cup. The new extra-large eup would be priced at $2.40. David anticipates that the new sales mix would be 50% for the 12-cunce cup, 30% for the 16-ounce cup, and 20% for the new 20-ounce cup. Assiame that material, laber, and overthead cosss remain the 310 anbenatro e. theopily curef cup instead of $.04 per cup. The new extra-large cup would be priced at \$2.40. David anticipates that the new sales mix woald be 50% for the 12-ounce cup, 30% for the 16-ounce cup, and 20% for the new 20 -ounce cup. Assume that material, labor, and overhead costs remain the 310 Appeadir a. The Daily Grind