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Compute the net income per crocodile assuming that only one crocodile was caught, sold, and collected on in this year. Assume the costs of shipping the 600 crocodiles from Southeast Asia to the State of Gould is part of the $390,000 cost of catching them. The $100 shipping cost is the cost of shipping each crocodile from the holding tank in the State of Gould to the customer.
Per Crocodile ? n. n. n. n. ? ? Sales Price Catching Expenses Shipping Expenses Collection and Bad Debts Expense Total Expenses per crocodile Net income per crocodile IV ? SALTWATER IMPORTS "Crazy" Henry Mason is a somewhat eccentric yet enthusiastic businessman who believes in the social responsibility of business. Incidentally, he is also interested in making enough money to live a comfortable life. As a supporter of the ecology movement, he is very concerned with the hunting of animals for industrial purposes, such as the making of furs, shoes, and ladies' handbags. As a consequence, he formed Saltwater Imports Enterprise (SIE), a company with a mission of promoting crocodiles as household pets. (The choice of the animal was purely coincidental.) He plans to catch crocodiles in Southeast Asia and sell them in the United States. 1 The senior leadership team of the company consists of Mr. Henry Mason (President), Michael Lee (Vice President of Production, who is in charge of catching crocodiles), Bruno Santos (Vice President of Sales), and Mary Grace (Vice President of Operations, who is in charge of administrative functions including cash collection from customers). Facilities Planning The first task facing Mr. Mason was to raise capital. This required estimating future capital needs by projecting the physical facilities and working capital needed for the business. Mr. Mason's estimates showed that he would need a fleet of boats to catch crocodiles in Southeast Asia and a holding tank in the State of Gould to keep them alive in captivity after they are shipped. Because of the need to extend liberal credit terms to skeptical customers, the company needed working capital to carry inventories and receivables. Finally, the company needed a large start-up investment for sales and an advertising campaign. The firm also needed funds to hire new employees and to rent office space in the State of Gould. Mr. Mason asked Mary Grace to prepare a forecast of activity to plan facility needs and to translate it into capital needed to start the business. First Year Results Based on the forecast provided by Ms. Grace, Mr. Mason and his ecology minded friends raised the capital for acquiring the facilities. He leased ten boats in Southeast Asia, a 20,000 square feet warehouse with a holding tank for the crocodiles in the State of Gould, and a 2,500 square feet office in the State of Gould. Both the warehouse and the office were leased from Andrew Property Management (APM) for three years, beginning January 1, 2008. The company opened its door for business on January 1, 2008. Bruno Santos launched an aggressive sales and advertising campaign built around the slogan that crocodiles were warm, friendly and greatly misunderstood creatures that deserved loving care. He designed a slick marketing campaign built initially around the slogan: "Crocodiles -- don't handbag them, handle them with love." During its first year, the company spent approximately $390,000 to catch 600 crocodiles. Of these, 400 crocodiles were sold and shipped to customers at a selling price of $1,250 per crocodile. Shipping costs of $100 per crocodile were paid for during the year. Customers were given liberal credit terms and only $300,000 from an equivalent 300 customers was collected during the first year. Ms. Grace estimated that as much as 20% of the sales price will be spent collection costs and bad debts expenses. At the end of the first year, Mr. Mason consulted with his other two colleagues and estimated that he could catch and sell 700 to 900 crocodiles for the next year. Because of the company's apparent success, Mr. Mason wanted to expand its facilities. This meant getting funds to rent more boats and warehouse space. He believed that he could now overcome the skepticism of banks and ask for a loan. On January 2, 2009, Mr. Mason notified Andrew Property Management that he no longer needed their Per Crocodile ? n. n. n. n. ? ? Sales Price Catching Expenses Shipping Expenses Collection and Bad Debts Expense Total Expenses per crocodile Net income per crocodile IV ? SALTWATER IMPORTS "Crazy" Henry Mason is a somewhat eccentric yet enthusiastic businessman who believes in the social responsibility of business. Incidentally, he is also interested in making enough money to live a comfortable life. As a supporter of the ecology movement, he is very concerned with the hunting of animals for industrial purposes, such as the making of furs, shoes, and ladies' handbags. As a consequence, he formed Saltwater Imports Enterprise (SIE), a company with a mission of promoting crocodiles as household pets. (The choice of the animal was purely coincidental.) He plans to catch crocodiles in Southeast Asia and sell them in the United States. 1 The senior leadership team of the company consists of Mr. Henry Mason (President), Michael Lee (Vice President of Production, who is in charge of catching crocodiles), Bruno Santos (Vice President of Sales), and Mary Grace (Vice President of Operations, who is in charge of administrative functions including cash collection from customers). Facilities Planning The first task facing Mr. Mason was to raise capital. This required estimating future capital needs by projecting the physical facilities and working capital needed for the business. Mr. Mason's estimates showed that he would need a fleet of boats to catch crocodiles in Southeast Asia and a holding tank in the State of Gould to keep them alive in captivity after they are shipped. Because of the need to extend liberal credit terms to skeptical customers, the company needed working capital to carry inventories and receivables. Finally, the company needed a large start-up investment for sales and an advertising campaign. The firm also needed funds to hire new employees and to rent office space in the State of Gould. Mr. Mason asked Mary Grace to prepare a forecast of activity to plan facility needs and to translate it into capital needed to start the business. First Year Results Based on the forecast provided by Ms. Grace, Mr. Mason and his ecology minded friends raised the capital for acquiring the facilities. He leased ten boats in Southeast Asia, a 20,000 square feet warehouse with a holding tank for the crocodiles in the State of Gould, and a 2,500 square feet office in the State of Gould. Both the warehouse and the office were leased from Andrew Property Management (APM) for three years, beginning January 1, 2008. The company opened its door for business on January 1, 2008. Bruno Santos launched an aggressive sales and advertising campaign built around the slogan that crocodiles were warm, friendly and greatly misunderstood creatures that deserved loving care. He designed a slick marketing campaign built initially around the slogan: "Crocodiles -- don't handbag them, handle them with love." During its first year, the company spent approximately $390,000 to catch 600 crocodiles. Of these, 400 crocodiles were sold and shipped to customers at a selling price of $1,250 per crocodile. Shipping costs of $100 per crocodile were paid for during the year. Customers were given liberal credit terms and only $300,000 from an equivalent 300 customers was collected during the first year. Ms. Grace estimated that as much as 20% of the sales price will be spent collection costs and bad debts expenses. At the end of the first year, Mr. Mason consulted with his other two colleagues and estimated that he could catch and sell 700 to 900 crocodiles for the next year. Because of the company's apparent success, Mr. Mason wanted to expand its facilities. This meant getting funds to rent more boats and warehouse space. He believed that he could now overcome the skepticism of banks and ask for a loan. On January 2, 2009, Mr. Mason notified Andrew Property Management that he no longer needed their
