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Snowie$,$ owned by Carl and Gordon Rupp, is a company

that provides training, equipment, and supplies for operating

a shaved ice business. Shaved ice is an ice$-$based refreshment

made by shaving a block of ice into a fluffy, snow$-$like ice.

The product is served in cups with flavored syrups added to

the ice. Due to its fine texture, shaved ice absorbs the syrup,

making each bite flavorful. Snowie does not sell franchises.

It sells a wide array of equipment and supplies, including ice

shavers, kiosks, carts, buses, syrups, cups, and other supplies

to independent operators.

PART $1$: COST$-$VOLUME$-$PROFIT ANALYSIS FOR A

SNOWIE KIOSK

Assume that you are evaluating whether to start a Snowie$1$

business.

You could operate a shaved ice kiosk at fairs, downtown areas,

and other outdoor events. The kiosk is portable with wheels

and a hitch. It has plenty of storage place, work area, electrical

outlets, lighting, and a water system. The flavored shaved ice,

a $$Snowie$,$ is normally offered in three sizes. For this case, we

are going to assume that only one size is offered$$the large size,

$20$ oz$.$ The large Snowie sells for US$$4\mathrm{.}00.$ See Table for a list of

all costs related to a large size Snowie.

In this case, use straight$-$line depreciation with a fiveyear life and salvage values of zero for both the ice shavers

and the flavor station. All monetary amounts in this case are

expressed in U$.$S$.$ dollars.

PART $2$: SPECIAL$-$ORDER PRICING FOR A

SNOWIE EVENT

Assume that Main Street Kent, an organization that hosts

outdoor events in downtown Kent, approaches you about

bringing your Snowie kiosk to the Octoberfest in Kent for one

day in October. Main Street Kent will provide the cups for the

event that are branded with the Kent Octoberfest logo$,$ so you

will not have any cup costs for this event. Main Street Kent

will also not be charging you a registration fee for this event.

Main Street Kent will allow you to advertise your business

in its mailings for two months at no cost and asks you to cut

your Snowie price for this one event to US$$3\mathrm{.}00$ in exchange

for the free advertising. You have no other event scheduled

for this one day in October, and you would work the event by

yourself $($you will not pay an employee for this one$-$day event$).$

You anticipate that you will sell $200$ Snowies on this one day

at Octoberfest. Do you accept Main Street Kent$$s special price

offer? Why or why not? Support your answer

Costs

All listed costs relate to the large size Snowie

Ice per Snowie $$0\mathrm{.}20$

Spoon straw $($need one per Snowie$)$ $$0\mathrm{.}02$

Styrofoam cup $($need one per Snowie$)$ $$0\mathrm{.}08$

Napkin per sheet $($need two per Snowie$)$ $$0\mathrm{.}01$

Servings per gallon of syrup $28$

Cost per gallon of syrup $($includes concentrate, preservative,

and sugar$)$

$$4\mathrm{.}25$

Hourly rate for workers $$10\mathrm{.}00*$

Event registration fee per day $$25\mathrm{.}00*$

Electricity, insurance, maintenance, and permit costs per month $$250\mathrm{.}00*$

Kiosk rental per month $$650\mathrm{.}00*$

Purchase cost of two ice shavers $($five$-$year life$)$ $$3,180\mathrm{.}00$

Purchase cost of a flavor station $($five$-$year life$)$ $$1,080\mathrm{.}00$

Number of days you anticipate opening the Snowies Kiosk per month $-10$ days, Number of hours you will work per day $-10$ hours per day

Number of hours you will pay employees per day $-6$ hours per day

Work to synthesize your answers to the case study together. Follow the guidance in the rubric for points.

REQUIREMENTS

$1.$ Specify your assumptions about the following items:

a$.$ Number of days you anticipate opening the Snowie

kiosk per month $\_\_\_\_\_\_\_$

b$.$ Number of hours you will work $($no wages required$)$

per day $\_\_\_\_\_\_\_\_$

c$.$ Number of hours you will pay an employee to work in

the Snowie kiosk per day $\_\_\_\_\_$

$2.$ Is the cost of syrup a variable or fixed cost with respect

to the number of Snowies sold? What is the cost of syrup

per Snowie? $($Use four decimal places in your response

and all calculations for this question.$)$

$3.$ Is the cost of the worker attending the kiosk a variable

or fixed cost with respect to the number of Snowies sold?

What is the cost of the worker$$s wages per day and per

month?

$4.$ What is the total variable cost per Snowie $($per cup$)?$

$5.$ What is the total fixed cost per month to operate the

Snowie business?

$6.$ Calculate the number of Snowies that you need to sell

each month to break even.

$7.$ How many snow cones must be sold to achieve an

operating profit of US$$2,000\mathrm{.}00$ per month $($before tax$)?$

$8.$ Think about the break even and target profit quantities

you just calculated. Do you think these quantities are

realistic? Discuss and support your answer

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