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20.000 $2.20 $2.500 Unit variable costs: Current fixed costs: Projected fixed costs: $0.50 $5.000 $7,500 Sales Fixed Costs Variable Costs EBIT 2 3 4 Broadway Caf 5 Units sold per month: 6 Average unit sales price: 7 Added lease payment, new offices: 8 Sales month 10 January February 12 March 13 April 14 May 15 June 16 July August 18 September 19 October 20 November 21 December Units 6,582 11.121 14,178 13.692 11,597 9,599 9.913 10.926 14,349 12,965 6,972 2,455 Sum 23 24 25 20,000 Unit variable costs: $2.20 Projected fixed costs $0.30 $7.500 2 3 4 Broadway Caf Units sold per month: 6 Average unit sales price: 7 8 9 Sales month 10 January February 12 March 13 April 14 15 June 16 July 17 August 18 September 19 October 20 November 21 December 22. 23 24 Units 6,582 11,121 14,178 13,692 11,597 9.599 9.913 10,926 14 349 12,965 6,972 2.455 Sales Fixed Costs Variable Costs EBIT $14,480.40 $7,500.00 $1,974.605,005.80 $24,466 20 $7,500.00 $8,386,30 3,629.90 $7,500.00 $4.263 40 $7,500.00 $7.500.00 $7,500.00 $7,500.00 $7,500.00 $7 500.00 $7,500.00 $7 500.00 $7,500.00 Sum: Supply Chain Management (SCM) Making Business Decisions II You have decided to try a new product called coffee- on-the-go. Each moming and afternoon, a Broadway Cafe truck will drive to the office park on the end-of- town offering coffee and other items for sale. This means that the truck must drive across-town four times each day. The cost of transportation to and from the sales area, plus the power demands of the truck's coffee brewing equipment, is a significant portion of variable costs. You are wondering if it would be worth trying to reduce the amount of driving and, therefore, the variable costs, if you leased a small cafe doser to the office park You currently have rent of $5,000 per month. The lease of a new cafe, closer to the office park, would cost an additional $2,500 per month. This would increase the fixed costs to $7,500 per month. Although the lease of new cafe would increase the fixed costs, a careful estimate of the potential savings in gasoline and vehicle maintenance indicates that The Broadway Cafe could reduce the variable costs from $0.50 per unit to $0.30 per unit. Total sales are unlikely to increase as a result of the move, but the savings in variable costs should increase the annual profit. PROJECT FOCUS: Consider the information provided to you in SCM_MBD2.xls. Especially look at the change in the variability of the profit from month-to-month. From November through January, when it is much more difficult to lure office workers out into the cold to purchase coffee, The Broadway Cafe barely breaks even. In fact, in December, the business lost money. Develop the cost analysis on the existing lease information using the monthly sales figures provided to you in the file SCM MBDII xls. Develop the cost analysis from the new lease information provided above. Calculate the variability that is reflected in the month-to-month standard deviation of earnings for the current cost structure and the projected cost structure. Do not consider any association with downsizing such as overhead --simply focus on the information provided to you. You will need to calculate the EBIT (earnings before interest and taxes). 20.000 $2.20 $2.500 Unit variable costs: Current fixed costs: Projected fixed costs: $0.50 $5.000 $7,500 Sales Fixed Costs Variable Costs EBIT 2 3 4 Broadway Caf 5 Units sold per month: 6 Average unit sales price: 7 Added lease payment, new offices: 8 Sales month 10 January February 12 March 13 April 14 May 15 June 16 July August 18 September 19 October 20 November 21 December Units 6,582 11.121 14,178 13.692 11,597 9,599 9.913 10.926 14,349 12,965 6,972 2,455 Sum 23 24 25 20,000 Unit variable costs: $2.20 Projected fixed costs $0.30 $7.500 2 3 4 Broadway Caf Units sold per month: 6 Average unit sales price: 7 8 9 Sales month 10 January February 12 March 13 April 14 15 June 16 July 17 August 18 September 19 October 20 November 21 December 22. 23 24 Units 6,582 11,121 14,178 13,692 11,597 9.599 9.913 10,926 14 349 12,965 6,972 2.455 Sales Fixed Costs Variable Costs EBIT $14,480.40 $7,500.00 $1,974.605,005.80 $24,466 20 $7,500.00 $8,386,30 3,629.90 $7,500.00 $4.263 40 $7,500.00 $7.500.00 $7,500.00 $7,500.00 $7,500.00 $7 500.00 $7,500.00 $7 500.00 $7,500.00 Sum: Supply Chain Management (SCM) Making Business Decisions II You have decided to try a new product called coffee- on-the-go. Each moming and afternoon, a Broadway Cafe truck will drive to the office park on the end-of- town offering coffee and other items for sale. This means that the truck must drive across-town four times each day. The cost of transportation to and from the sales area, plus the power demands of the truck's coffee brewing equipment, is a significant portion of variable costs. You are wondering if it would be worth trying to reduce the amount of driving and, therefore, the variable costs, if you leased a small cafe doser to the office park You currently have rent of $5,000 per month. The lease of a new cafe, closer to the office park, would cost an additional $2,500 per month. This would increase the fixed costs to $7,500 per month. Although the lease of new cafe would increase the fixed costs, a careful estimate of the potential savings in gasoline and vehicle maintenance indicates that The Broadway Cafe could reduce the variable costs from $0.50 per unit to $0.30 per unit. Total sales are unlikely to increase as a result of the move, but the savings in variable costs should increase the annual profit. PROJECT FOCUS: Consider the information provided to you in SCM_MBD2.xls. Especially look at the change in the variability of the profit from month-to-month. From November through January, when it is much more difficult to lure office workers out into the cold to purchase coffee, The Broadway Cafe barely breaks even. In fact, in December, the business lost money. Develop the cost analysis on the existing lease information using the monthly sales figures provided to you in the file SCM MBDII xls. Develop the cost analysis from the new lease information provided above. Calculate the variability that is reflected in the month-to-month standard deviation of earnings for the current cost structure and the projected cost structure. Do not consider any association with downsizing such as overhead --simply focus on the information provided to you. You will need to calculate the EBIT (earnings before interest and taxes)