Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are going to graduate in a few months. While you have a job offer from a good firm with a starting salary of $50,000,
You are going to graduate in a few months. While you have a job offer from a good firm with a starting salary of $50,000, you have always dreamed of opening a milkshake shack on the "Big Island" of Hawaii (fortunately, you are not scared of volcanos). A unique feature of your milkshakes is that you will serve them with flavored straws that match the flavor of the chosen milkshakes. Based on your market research, you think you can sell a small milkshake for $7.00 and a large one for $10.00. The cost of materials needed to make milkshakes are as follows: DIRECT MATERIAL INGREDIENTS Whole Milk ($15 for a 5 gallon=740 oz.) Cream ($20 for 1 gallon=128 oz.) Sugar ($10 for a 15 lb. bag=30 cups) Premium Vanilla Ice Cream ($24 for 600 oz.) Flavorings Flavored specialty straws Cups (500 8 oz. cups @ a cost of $200) Cups (500 12 oz. cups @ a cost of $250) Small (8 oz. size) (need 2 oz. of milk) (need 2 oz. of cream) (need cup of sugar) (need 6 oz.) .25 per shake .75 per straw Large (12 oz. size) (need 3 oz. of milk) (need 3 oz. of cream) (need cup of sugar) (need 9 oz. of cream) .40 per shake .75 per straw Fixed Costs: Shack rental: $500 a month Cleaning and other miscellaneous supplies: $100 a month Equipment: Industrial Milk Shake Maker: $72 per machine x 10 machines-$720 Equipment: Industrial Refrigerator/freezer: $480 Countertops: $1,200 Tables and benches for customers to sit outside: $108 per bench-set x 10-$1,080 Annual insurance: $600 a year Sign: use your marketing knowledge to think of a good name= $5,000 Employees: Two part-time employees: with each receiving a monthly salary of $800 per month (including taxes and benefits). Other costs: 10% of gross sales must be given to resort where shack will be located on its premises. Other Assumptions: Ignore the time value of money Milkshake makers, tables and benches are assumed to last for 3 years, but the refrigerator/freezer, counter tops and sign are assumed to last for 10 years
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started