Ben and Ivan live in CNY, are in their mid-20s, and have been friends for a long time. They both enjoy an active lifestyle and hit the gym several days a week. They have realized that unless they plan properly it is hard to get a post-workout meal that meets their fitness goals. Most of the time, they go to the gym and then straight to work. Meals are on the go and they don’t have time to plan. One day while they were working out Ben said, “Wouldn’t it be great if we could just buy a fresh postworkout meal here at the gym?” Ivan agreed but then said, “There is no room in this gym and they probably don’t want to deal with food.” Then Ben had an epiphany and said, “What if we started a food truck and went around to all the gyms in the area offering this service?” They did a little research and learned that food trucks were a hot trend. They also found that there were supporting trends in nutrition, healthy lifestyles and exercise in the macro-environment. They also did a little primary market research and found that people would be willing to pay between $4-$7 for a fresh post-workout meal. Recipes can be pulled off the internet and ingredients bought from several local and internet suppliers. They now need to figure out is if this is economically viable. They have asked you to identify the costs for this business and answer the following question, “Will this make money?” They want to know if they should quit their day jobs and pursue this full time. Currently they each make $45,000 per year but are willing to take a pay cut to $35,000 in the short term so they can “live the dream”. Since you have taken EEE451/625 you learned about an awesome tool called the Economic Model. You think that this could help you answer Ben & Ivan’s question. Your task: Build the Economic Model.

PART 1 The economic model should be presented ENTIRELY in tables Table 1: Revenue drivers including price • (for simplicity please limit the revenue drivers to a maximum of three; at least two revenue drivers are required) Table 2: Variable Costs Table 3: Fixed Costs Table 4: Start Up costs Table 5: Contribution Margin(s) BMC ECN MDL 2 Table 6: Break even in units and dollar amount • this should be calculated by using the formula BE= FC/CM) • even though you are using a formula somewhere on this table I need to know the actual numbers you used in the formula

PART 2 Ben and Ivan want your opinion on this business. They have asked you the questions below. Please answer the questions within the context of the economic model and your results above. 1. What does the breakeven in units and dollar amount tell you? 2. Do the breakeven numbers seem achievable? Why or why not? 3. Give me three things Ben and Ivan could do to reduce their breakeven? 4. Should they quit the day jobs that they hate but make them a good living? (Currently they each make $45,000 per year but are willing to take a pay cut to $35,000 in the short term so they can “live the dream”.)

Answer rating: 100% (QA)

1 The bre ake ven point is the number of units or dollar amount that must be sold in order to cover ... View the full answer