60.1K

Verified Solution

Link Copied!

Please use the information below to complete last months Actual Income Statement for Tims Travelling Smoothie Shop. She converted an old ice cream trolley with attached bicycle and travels around to local businesses in the summertime making/selling smoothies for her summer job.

In July, Tims sold on average 35 smoothies per day (so 1085) at an average price of $5.00. The cost to make each smoothie is $0.50 for cup and cover, $2.50 for fruit and veggies, and $1.25 for juice and yogurt.

The fixed Monthly Costs are as follows:

Interest on loan for converted trolley/bike $200

Insurance $150

Advertising $200

Cleaners for sanitizing $100

Tax rate is 15%

Next months Projected Income Statement is based on a few new planning assumptions:

In August, following her renewed sustainability plan, she thinks she will sell 20% more smoothies per day, at an average price of $6.00. The new cost for the cup and cover is 50% more, because it is compostable. The cost for fruit and veggies goes down to $2.00 because we have a local source for 2nds. Finally, we have decided to switch to homemade almond milk at the request of many customers, at a price per smoothie of $.75. (This will replace the juice and yogurt).

Per Month fixed Costs:

Interest on loan Stays the same

Insurance Stays the same

Advertising We have cancelled this & are only using social media

Cleaners for sanitizing Using more environmentally friendly cleaners $150

Hired a helper for a few hours a week for set amount of $500

Tax rate is 15% (stay the same)

1. Complete the Actual Income Statement and the Projected Income Statement using the same layout as demonstrated in Exercise 2.

2. Determine the Profit Margin for July and August.

3. Using the break-even calculation from last chapter, determine the break-even number of smoothies and the break-even sales revenue for each month. Remember: For the units, we dont sell partial smoothies (round up).

4. What are your thoughts on the changes Beth made to her travelling smoothie shop?

Answer & Explanation Solved by verified expert

See Answer