Zelala Snack Shop, a student-run convenience store is located in the academic building housing the Business Department of a small Malaysia College campus. The store is run under the umbrella of a student organization-Business club (BC). Zelala Snack Shop is headed by a Chief Executive Officer IN (CEO) who reports to the President of BC and involves Faculty Advisors in managerial meetings. The shop sells a variety of iters including simple
stationery, snacks, and instant coffee.
A competitor shop launched its operation in the Spring 2020 semester. As a means to remain competitive, Zelala Snack Shop is considering to accept student debit cards called StudentCard and hope to triple customer traffic. The number of daily transactions was estimated to increase from 15 to 55. The estimated dollar value of each transaction would remain at RM2.00. The average number of full business days per semester was estimated to be 60 days for analysis purposes.
The upcoming cost of accepting StudentCard is a combination of fixed and variable costs.
- The card scanner/reader cost RM25.00 per month to lease.
- Each transaction using StudentCard would cost RM0.15.
- There was an 7 percent fee for each sale on StudentCard.
The RM25.00 per month charge on the reader would have to be paid even when the store was closed for winter and summer breaks in order to keep the account active.
Below are the contribution margin income statement for Zelala Snack Shop before accepting StudentCard.
Assuming that the Shop accepts StudentCard in the Fall 2020 semester, prepare a pro-forma contribution margin income statement. Use the average sales and cost data presented for previous semesters and the new costs of StudenCard to complete this exercise
