Using the Contribution Margin per Composite Unit from part 3.1, calculate the number of composite units TWM must sell to earn a monthly target income (profit) of $34,000. Calculate the number of units of each product that TWM must well to earn a monthly target income (profit) of $34,000.

Do not use Dollar Signs ($). Carry each number to two decimal places.

Calculation	Amount
Monthly Fixed Costs
Monthly Target Income	34,000
Fixed Costs plus Target Income
Composite units required to achieve Target Income
Hot dogs that must be sold to achieve Target Income
Churros that must be sold to achieve Target Income
Waters that must be sold to achieve Target Income

The Weenie Man

Assume one month has four weeks. Ignore payroll and income taxes.

Mike Lowry owns a hot dog stand called The Weenie Man (TWM). He operates his stand on a busy street corner between the hours of 10am and 3pm, Monday - Friday. He sells hot dogs for $7/each, churros for $5/each and bottled water for $3/each. He also offers free condiments to his customers. He buys hotdogs in packages of 100 for $40 and packages of 80 buns for $36. Frozen churros cost $100 for a pack of 40 and bottled water costs $18 for a pack of 24. Each month, TWM buys king sized jars of mustard and ketchup for $100 each, onions and relish for $150 each and a vat sauerkraut $200. For health and safety reasons, he replaces all condiments on the first of every month, even though they are not usually empty.

Mike bought his cart 3 years ago for $252,000 and expects that it will last for a total of seven years. The cart came with a solar panel, so he does not have utility costs. He pays for an annual street vendor permit in the amount of $6000 and renews his safe food handling certification once a year for a cost of $1200. He carries liability insurance, which costs $4,800 every six months.

On average, sells 200 hot dogs, 80 churros and 120 bottles of water each day.

Use the information above to complete parts 1, 2, and 3.

Mike's town has passed a junk food tax. He must pay a tax equal to 25% of sales on the hot dogs and churros. There is no tax on the water. Mike is considering moving his hot dog cart to a location outside the city limits to avoid having to pay the tax.

After scouting locations, Mike realizes he won't get enough foot traffic to support his cart, but he has found a space he can rent for $3,500/month. He will need to pay utilities of approximately $500/month. In lieu of a street vendor permit, he will need to obtain a business license, which is $240/annually in the municipality he is considering. Insurance on the new location is $800/month.

Mikes direct costs will not change in the location, however, he will now need two jars of each of the condiments per month, except for sauerkraut. He'll still only need one jar of sauerkraut per month.

In his new location, Mike will be able to extend his hours to 11am - 7pm to take advantage of the lunch and dinner hour. There is also enough demand that he'll be able to be open seven days per week. In order to extend his hours, he'll need to hire one employee for 40 hours per week at a rate of $20/hour.

Mike estimates he will sell 2,000 hot dogs and 1,200 bottles of water per week. He believes churro sales will decline to only 500 per week.

Use the information above to complete part 4.

Before Mike had a chance to move his business, the junk food tax was repealed and he has decided to stick with his current location and keep his cart. He has also decided to add a menu item. He can either add hot pretzels or slurpees. When assessing his two investment options, Mike would like to make a minimum return of 10% on his investment.

Pretzels

Mike can buy a pretzel warmer for $25,000. He would sell pretzels for $4/each and can purchase them for $35 for a box of 50 pretzels. He will need a propane tank for the pretzel warmer and estimates he will spend $550/month on fuel. Mike estimates he will sell 30 pretzels each day. Mike estimates he can use the pretzel machine to generate income for five years, after which time it will have a zero value.

Slurpees

Mike can buy a slurpee machine for $35,000. He estimates he can sell 75 slurpees per day for $2/each. His variable costs for slurpees is $0.50 per slurpee for syrup and ice. His fuel costs for operating the slurpee machine should be about $750/month. Mike estimates he can use the slurpee machine to generate income for eight years, after which time it will have zero value.