Sanjana's Sweet Shoppe operates on the boardwalk of a New England coastal town. The store only...

 

 

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Sanjana's Sweet Shoppe operates on the boardwalk of a New England coastal town. The store only opens for the summer season and the business is heavily dependent on the weather and the economy in addition to new competition. Sanjana Sweet, the owner, prepares a budget each year after reading long-term weather forecasts and estimates of summer tourism. The budget is a first step in planning whether she will need any loans and whether she needs to consider adjustments to store staffing. Based on expertise and experience, she develops the following. Scenario Good Fair Poor Gross Margin per Customer (Price - Cost of Goods) $6.4 5.4 1.8 Number of Customers 44,000 34,000 29,000 Sanjana assumes, for simplicity, that the gross margin and the estimated number of customers are independent. Thus, she has nine possible scenarios. In addition to the cost of the products sold, Sanjana estimates staffing costs to be $44,000 plus $2 for every customer in excess of 34,000. The marketing and administrative costs are estimated to be $12,700 plus 3 percent of the gross margin. Required: Prepare an analysis of the possible operating income for Sanjana similar to that in Exhibit 13.15. What is the range of operating incomes? Number of Customers Operating Costs Marketing & Admin Operating Profit (Loss) Gross Gross Margin Margin Poor 18 29,000 Fair 5.4 29,000 Good 6.4 29,000 Poor $. 1.8 34,000 Fair 5.4 34,000 Good 6.4 34,000 Poor 1.8 44,000 Fair %24 5.4 44,000 Good 6.4 44,000 Exhibit 13.15 Spreadsheet Analysis of Alternative Budgeting Scenarios B. D. 1. 2. Sales Cost of Goods Sold Gross Marketing & Admin Operating Profit Quantity Revenue Margin 4 225,000 225,000 225,000 $5,625,000 $6,750,000 $7,875,000 $3,712,500 $3,712,500 $3,712,500 $1,912,500 $3,037,500 $4,162,500 $1,652,250 $1,652,250 $1,652,250 $260,250 $1,385,250 $2,510,250 7 8. 240,000 240,000 240,000 $6,000,000 $7,200,000 $8,400,000 $3,960,000 $3,960,000 $3,960,000 $2,040,000 $3,240,000 $4,440,000 $1,686,000 $1,686,000 $1,686,000 $354,000 $1,554,000 $2,754,000 10 11 12 13 260,000 260,000 $6,500,000 $7,800,000 $9,100,000 $4,290,000 $4,290,000 $4,290,000 $2,210,000 $3,510,000 $4,810,000 $1,731,000 $1,731,000 $1,731,000 $479,000 $1,779,000 $3,079,000 14 260,000 15 Sanjana's Sweet Shoppe operates on the boardwalk of a New England coastal town. The store only opens for the summer season and the business is heavily dependent on the weather and the economy in addition to new competition. Sanjana Sweet, the owner, prepares a budget each year after reading long-term weather forecasts and estimates of summer tourism. The budget is a first step in planning whether she will need any loans and whether she needs to consider adjustments to store staffing. Based on expertise and experience, she develops the following. Scenario Good Fair Poor Gross Margin per Customer (Price - Cost of Goods) $6.4 5.4 1.8 Number of Customers 44,000 34,000 29,000 Sanjana assumes, for simplicity, that the gross margin and the estimated number of customers are independent. Thus, she has nine possible scenarios. In addition to the cost of the products sold, Sanjana estimates staffing costs to be $44,000 plus $2 for every customer in excess of 34,000. The marketing and administrative costs are estimated to be $12,700 plus 3 percent of the gross margin. Required: Prepare an analysis of the possible operating income for Sanjana similar to that in Exhibit 13.15. What is the range of operating incomes? Number of Customers Operating Costs Marketing & Admin Operating Profit (Loss) Gross Gross Margin Margin Poor 18 29,000 Fair 5.4 29,000 Good 6.4 29,000 Poor $. 1.8 34,000 Fair 5.4 34,000 Good 6.4 34,000 Poor 1.8 44,000 Fair %24 5.4 44,000 Good 6.4 44,000 Exhibit 13.15 Spreadsheet Analysis of Alternative Budgeting Scenarios B. D. 1. 2. Sales Cost of Goods Sold Gross Marketing & Admin Operating Profit Quantity Revenue Margin 4 225,000 225,000 225,000 $5,625,000 $6,750,000 $7,875,000 $3,712,500 $3,712,500 $3,712,500 $1,912,500 $3,037,500 $4,162,500 $1,652,250 $1,652,250 $1,652,250 $260,250 $1,385,250 $2,510,250 7 8. 240,000 240,000 240,000 $6,000,000 $7,200,000 $8,400,000 $3,960,000 $3,960,000 $3,960,000 $2,040,000 $3,240,000 $4,440,000 $1,686,000 $1,686,000 $1,686,000 $354,000 $1,554,000 $2,754,000 10 11 12 13 260,000 260,000 $6,500,000 $7,800,000 $9,100,000 $4,290,000 $4,290,000 $4,290,000 $2,210,000 $3,510,000 $4,810,000 $1,731,000 $1,731,000 $1,731,000 $479,000 $1,779,000 $3,079,000 14 260,000 15

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A B E F G Analysis of the possible operating income for Sanjana Gross margin Number of custome... View the full answer