1. Classify each cost as fixed or variable (see below) 2. Calculate the annual cost for cost description (see below) Using the cost and sales data below, prepare Income Statements (to the 3. right) based on the criterion provided. ALL YELLOW CELLS REQURE DATA TO BE INPUT (START BELOW) Classify Cost 500 FIXED 150 FIXED 800 FIXED 150 FIXED Annual Cost $ 6,000 $ 1,800 $ 800 $ 600 GENERAL BUSINESS COSTS Rent Monthly $ Utilities Monthly $ Insurance Annually $ Water Quarterly S Coffee Making Equipment - Depreciation (based on cost of $12,000 and a 5 year life and zero salvage value) Annually Table and Chair Rental Monthly $ Laptop and Credit Card Scanner - Depreciation (based on cost of $4,800 with a 4 year useful life and zero salvage value) Annually Barrista Salary Annually $ Other Miscellaneous Costs Monthly $ FIXED 100 FIXED $ 2,400 $ 1,200 FIXED 25,000 FIXED 150 FIXED $ 1,200 $ 25,000 $ 1,800 COST OF CUP OF COFFEE Coffee Grounds Sugar/Cream/Flavoring Paper Cup and Top Heat Protection Sleeve Plastic Stirrer per cup per cup per cup per cup per cup $ $ $ $ $ 0.75 VARIABLE 0.05 VARIABLE 0.12 VARIABLE 0.05 VARIABLE 0.03 VARIABLE SALES PRICE OF COFFEE per cup $ 4.00 INCOME STATEMENT SLEIVINIU LIPICI SLETWENTO LEVOZ LET ITU UNTVOES (COMPARED TO BASE (COMPARED TO BASE (COMPARED TO BASE SCENARIO) SCENARIO) SCENARIO) BREAK EVEN POINT BASE SCENARIO What Happens to Net What Happens to Net Income if I Use Income if I Spend Premium Kona Coffee YOU CREATE A $5,000 on Advertising Grounds Costing $1.25 SCENARO AND BRING and Cups of Coffee per cup and Cups of IT TO THE Increases 10%? Coffee Increases 8%? DISCUSSION GROUP Annual Target Net Income of $60,000 At Break Even Point Sales Revenue Variable Costs Contribution Margin Fbxed Costs $ $ 40,800 40,800 Net Income $ (40,800) $ (40,800) $ $ BREAK EVEN POINT CALCULATION BASED ON THE SCENARIO ABOVE -Cups of Coffee -Sales Revenue CM Ratio: -Dollars -Ratio