Economics

Economics

1. Explain how owning and running a food truck might impact your sales and costs (Explain both variable and fixed costs).

2. On a typical day in Kamloops, how many “Ripped Pig” sandwiches must be sold in order to break even? Calculate and explain why this number and breakeven concept should be relevant to the entrepreneurs.

3. If Cat and Joe wish to make a $100,000 profit for the year (after tax), how many pulled pork sandwiches must the Pig Rig sell each day? Assume all days are in Kamloops at regular prices. The profit before taxes is 125,000, use this in the formula.

4. Prepare three contribution-format income statements for one day’s business at the Pig Rig based on 4a) optimistic, 4b) realistic, and 4c) pessimistic projections for a regular, non-event day in Kamloops. Briefly explain and compare each of them.

5. Prepare three contribution-format income statements for the Bullarama event based on: 5a) an optimistic projection (no onsite competitors), 5b) a conservative projection (one onsite competitor), and 5c) a pessimistic projection (two onsite competitors). Explain and compare each of them.

6. Explain several non-financial advantages and disadvantages of attending the Bullarama event.

7. Cat and Joe’s Pig Rig operates for 180 days each year. 7a) Explain several pros and several cons of operating for 180 days. 7b) Compare/contrast the major advantages and disadvantages of operating for 180 days vs. a full year 365 days. 7c) Which would you recommend and why?

8. Assume instead of one product (the Ripped Pig sandwich), Cat & Joe’s Pig Rig served three items: 1. the Ripped Pig sandwich, which sells for $12 and had variable costs of 40% of sales price; 2. the Pork Taco, which sells for $9 and had variable costs of 35%; and 3. the Mac and Cheese Pulled Pork, which sells for $12 and had variable costs of 50%. Fixed costs were expected to remain at $10,000 per year (180 operational days) and income taxes were expected to be 20%. On a typical day, Cat and Joe would serve a total of 125 customers. The sales mix is as follows: 25 customers would order Mac and Cheese Pulled Pork, 25 would order Pork Tacos, and 75 would order the Ripped Pig sandwich.

8a) Complete an analysis showing the financial results for the above scenario. (Layout the revenue, variable cost and contribution margin for each item).

8b) Assuming the same sales mix as described above, if the entrepreneurs wish to earn a target profit of $100,000 after tax ($125,000 before tax), how many units of each item must be sold? (hint: calculate a per unit contribution analysis for each item and then an average contribution margin will need to be calculated, which is done by multiplying each of the CM’s by the sales mix percentage).


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