1 Evaluate the economics of one unit analysis that Amy and Steve conducted
1. Evaluate the economics-of-one-unit analysis that Amy and Steve conducted and then answer the following:
a. Amy and Steve assumed that, for every \$6 in sales, \$4 will come from selling computer-related services. Calculate what percentage of their total sales revenue per unit this \$4 represents.
b. For every \$2 in food and beverage sales, Amy and Steve assumed that their COGS per unit would be \$1. Calculate the markup percentage.
c. For every \$4 in computer services sales, Amy and Steve assumed that their COGS per unit would be 25 cents. Calculate the markup percentage.
2. List three things that Amy and Steve should have considered doing to adapt to the changes in the environment now that their customers no longer wanted to pay for Internet services, and expected the café to provide free wireless connections.
3. Evaluate Amy and Steve’s income statement for their first month of operations:
a. Is the café operating at a profit or a loss?
b. How many units above or below breakeven were sold?
4. Amy and Steve decided to take on a \$50,000 loan to finance their start-up investment. Each month they are paying \$1,469 in interest charges. Look at their total monthly fixed costs. What percentage of their total monthly fixed costs does this \$1,469 represent?
5. What is the debt-to-equity ratio of the Portland Freelancer’s Café?
6. Look at each section of the café’s cash flow statement. Write a memo highlighting three insights you have about why this business is not succeeding, based on what you see in its cash flow statement.
7. Review the café’s balance sheet. Explain why the net value of the café’s property and equipment has decreased from \$80,000 in month one to \$64,000 at year’s end.
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