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a. david would like to increase sales in the secind year of opperations so that he may raise his salary to $50,000 (not jnckuding $15,000 of fringe benefits) while reducing his workload to 40 hours per week with teo paid weeks of vacation during the year. reducing his workload will require increasing the number of hours worked by part time employees by 1,080 hours per year. Assune the introduction of the extra large cup 20 oz and the new sales mix. ( new 20 oz cup - cup, lid & sleeve shoudl cost the same as the 16oz but cream & sugar is expected to cost $.06 instead of $.04 per cup. this would be priced at $2.40. he snticipated the new sales mix to be 50% for the 12 oz cup, 30% for the 16 oz cup & 20% for the new 20 oz cup. also assume that the material, labor, and overhead cost remain the same.)what level of annual sales would be required in order for david to reach his goal?

b. during the second year of opperations do you think david will be able to reach his goal? why or why not?

Twelve months ago, David opened a coffee shop, The Daily Grind, in Mercy Hospital's former gift shop. David was confident that he had the knowledge to make a success of this new business. He produced a quality product that people needed, had priced the product to be very competitive, and had a great location in a high-traffic area of the hospital. Material Costs he Daily Grind uses a specialty brand of Kona coffee beans costing $8 per pound. Each pound of coffee beans produces 256 ounces of coffee. Coffee is sold in three sizes: a small cup holding 8 ounces, a medium cup holding 12 ounces, and a large cup holding 16 ounces. The cups needed to serve the coffee cost $.05 for the small cup, $.06 for the medium cup, and $.07 for the large cup. Lids cost $.03 per cup and are the same regardless of cup size. Sleeves cost an additional $.04 per cup. On average, sugar and cream cost $.02 per cup for small cups, $.03 for medium cups, and $.04 for large cups. the first year of operations. Fringe benefits for David, inctuding fiealth fnerunce and payroll taxes, accounted for an additional $10,000 of costs for th company. Part-time employees work an average of 24 hours each week and are paid $9 per hour. Payroll taxes and other costs average about $1.00 per hour for parttime employees. As shown in the following table, parttime employees worked from 656 hours to 727 hours each month: Lahor Costs he Daily Grind is open 12 hours each day, 7 days a week ( 365 days per year), and is staffed with three employees during the morning shift (7:00-11:00), two employees from 11:00 until 3:00, and three employees from 3:00 to 7:00. Labor is a fixed cost, because the employees are paid regardless of whether coffee is sold. David worked 60 hours each week, on average, and was paid a salary of $30,000 during This comprehendive ase indudes toplis and cencopts covered in Oaptes 1 through 6 of Ouerhead Costs uring the first year of operations, the hospital charged rent of $2,000 per month. As part of the rental cost, the hospital provided furniture and fixtures for the shop, as well as nightly cleaning services. David leased a drip coffeemaker, refrigerator, coffee grinder, scale, and cash register for $150 per month, total. David paid directly for his utilities (electricity and water). The costs of electricity include the costs of heating and cooling the shop. as well as the cost of running the electric appliances (refrigerator, coffeernaker, etc). For the first 12 months of operations, utility expenses were as follows: Selling and Administrative Costs avid incurred $200 a month in accounting fees and spent $500 on various promotional and advertising materials during the year. He also paid $1,000 for liability insurance. Sales Reuenue During the first year of operations, David set the shop's prices to be slightly lower than their competitors'. The Daily Grind sells a small cup of coffee for $1.25, a medium cup for $1.65, and a large cup for $1.95. Sales revenue was as follows: Sales Reuenue During the first year of operations, David set the shop's prices to be slightly lower than their competitors'. The Daily Grind sells a small cup of coffee for $1.25, a medium cup for $1.65, and a large cup for $1.95. Sales revenue was as follows: *Coffee sales average 10\% small cups 10 vunces), z70 nicuinur cup (12 ounces), and 40% large cups (16 ounces)