W04 Case Study: Maria's First Months

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For Maria, opening The Soup Shack in January 2025 was the culmination of months of dreaming and planning. She envisioned a cozy neighborhood restaurant where people could savor her hearty soups, freshly baked bread, and warm community vibes. What she hadn't anticipated was how quickly her dream would transform into a test of her resilience, resourcefulness, and willingness to adapt.

January: A Promising Start

January was a month of firsts for Maria. After weeks of late nights painting walls, assembling furniture, and testing recipes in her newly-equipped kitchen, she opened her doors to the public. She ended not choosing any of the initial locations she had been considering - and it was a blessing. Heavenly Father knows what He is doing and just what she needed.

As she was getting ready to make a location decision, Maria found out that a fourth location had just become available. It was still in the downtown area, but this location was near the train station where foot traffic was higher and later into the evening. There were some other nearby restaurants, which was good and bad - more competition but also the opportunity for more customers than any of the locations, including the Town Center location. The costs were only $1,100, which was a little less than Town Center and with a bigger customer potential.

Thanks to a well-timed marketing campaign, the grand opening was a success. Maria spent $1,450 on ads, signage, and a professional-looking website, which paid off in the form of a steady stream of customers for the grand opening. (Details are below).

Because of the marketing blitz, as well as a generous discount of 25% off for the first month, the numbers seemed promising. The chicken soup was the bestseller with an average of 27.0 bowls served daily, while the Italian bread, baked fresh every morning, became an irresistible favorite at 34.0 servings a day. She had decided to use some "charm pricing" for the main items on her menu. The restaurant buzzed with energy as locals and travelers stopped by to grab lunch and catch up with friends in the cozy ambiance Maria had worked so hard to create.

Behind the scenes, however, Maria was running on fumes. To make sure she was successful, every day started at 5 a.m. when she helped the cook as he prepped ingredients, kneaded dough, and made sure the ovens were humming before the first customer arrived. She also juggled accounting, ordering supplies, and keeping track of her staff's schedules. What she didn't track? Her own time. Maria hadn't budgeted paying herself, a decision she brushed aside with a hopeful, "Once the business takes off, I'll figure that out."

Please complete Maria's financials statements for January with the following information:

This is the information that should go in your Revenue tab:

Volumes:

Daily Quantity (21 days/month)

Jan- 25

Chicken Soup

27.0

Spicy Sausage Soup

12.0

Beef & Bean Soup

7.0

Italian Bread

34.0

Soft Drinks

16.0

Calculate the promotional prices to the nearest penny at 25% off regular prices

Item

Regular Price

Promotional

Chicken Soup

$

5.49

$

-

Spicy Sausage Soup

$

5.99

$

-

Beef & Bean Soup

$

6.99

$

-

Italian Bread

$

1.75

$

-

Soft Drinks

$

1.95

$

-

Perform the needed calculations to make row 2 on your Revenue tab show the right total revenue and then reference those cells in the tab labeled Maria's Financials. You will continue with the other costs to complete Maria's January income statement to see how she did.

Use the COGS as previously calculated along with the volumes in the Revenue tab to complete the COGS costs for January in the COGS tab. (You may want to reference the quantities on the Revenue tab to get your proper Total COGS amounts. Set up a COGS Material section and a COGS Direct Labor section so that if COGS change in future months, it will be easy to model the changes with the changing volumes each month. It could but does not have to look like the following:

You will want a similar format in Revenue with quantities and prices. BUT WARNING: please make sure that only one tab, either Revenue or COGS controls the inputs of the quantities. If you have them separate, it will be easy for your model to get out of sync.

You will want a similar construction with your fixed costs on your Operating Costs tab so it will be easy to input the costs by detail in each month and see where / how our costs are changing.

This is what Maria's Operating Costs were for January:

Rent = $1,100. What a blessing to be by the train station with a great location with lots of potential customers.

Electricity = $225. A bit more that what she expected but she wasn't exactly sure what it was going to be.

Gas - $120. Part of the gas usage is for heating and part for the hot water heater. She expects these costs to be about half during the summer months.

Business and liability insurance = $425. This is necessary for a business but it is about twice as high as she was anticipating. Maybe after she proves she is a low-risk customer, this could drop some.

Administrative costs:

Accountant - $250/month. She was able to retain an accountant who would close her books each month.

Payroll Services - $75/month. She didn't understand payroll taxes (so many different kinds, levels, calculations, laws, etc.), deductions, and all the government filing that was associated with payroll, but Maria was able to find a service that would take care of it for her. This was an unexpected expense but necessary because she didn't have the knowledge of that part of the business.

Internet services - $125/month. This is the annual contracted rate and could go up or down a at each contract renewal.There are plenty of internet service providers around, so if the prices go up, she has choices.

Marketing:

Ads and signage - $100/month. She knew getting word out was important, so she ran several ads in serval channels for a great blitz campaign. It was $1,200 in January- a big expense but worth it as she had so many customers, but she expects this expense to drop to about $100/month going forward.

Web page - $175 initially and $75/month. She was also able a web page designed that even included her menu. January was a bit expensive at $250 total, but the costs would be manageable in the future. The expense of the webpage was less than she had expected. She thought it was going to be about twice that amount, but she found a college student who was studying web design and got a great deal.

Fixed Asset:

Below are the fixed assets Maria purchased to get started.Calculate the monthly deprecation as well as the Gross Fixed Asset Value and the Accumulated Depreciation for each month.

Cost

Life (years)

Salvage

Purchase Month

Ovens

$

1,600

3

$

150

Jan 2025

Stove

$

2,450

3

$

50

Jan 2025

Painting and Prep

$

1,750

5

$

-

Jan 2025

Tables and Chairs

$

2,450

5

$

150

Jan 2025

Other Kitchen Appliances

$

1,345

2

$

50

Jan 2025

Non-operating expenses:

To help get her started, she needed some additional cash. She was able to demonstrate that her business was going to be a safe investment for the bank. It also didn't hurt that Maria brought a pot of soup to the bank employees so they could actually see how great Grandma's soup really was. She hoped some would become customers as well! Maria was able to get a loan from the bank for $8,000 - perfect! It was financed at 8.75% for 36 months. Her monthly payment of $253.47 was definitely doable!

In January, Maria's payment of $253.47 included $58.33 interest expense. The remaining amount was not an expense, but it was a reduction of the loan amount the accountant would put on the balance sheet.

Tax Expense - The accountant told Maria that her business would pay 25% taxes on her taxable income. January's taxable income would be a loss with all the extra marketing expense and discounted prices, but calculate and input the tax for January as normal. (It will be a negative expense and will make her net income larger than her EBIT. That is fine because she will make money going forward and the loss will offset her net income when things turn around.)

Please calculate Maria's January income statement based on the information above.

Question 5

1 pts

What is the January promotional price for a bowl of Spicy Sausage Soup, (25% off regular price) rounded to the nearest penny?

Flag question: Question 6

Question 6

1 pts

What is the January promotional price for a serving of Italian Bread, (25% off regular price) rounded to the nearest penny?

Flag question: Question 7

Question 7

1 pts

Given January's pricing and volumes what was the total revenue for Chicken Soup, rounded to the nearest dollar?

Group of answer choices

Between $2,230 and $2,250

Between $2,380 and $2,400

Between $2,330 and $2,350

Between $2,280 and $2,300

Flag question: Question 8

Question 8

1 pts

Given January's pricing and volumes what was the total revenue for Beef & Bean Soup, rounded to the nearest dollar?

Group of answer choices

Between $730 and $750

Between $820 and $840

Between $790 and $810

Between $760 and $780

Flag question: Question 9

Question 9

1 pts

How much will the monthly depreciation expense be for the Stove?

Group of answer choices

$71

$69

$73

$67

Flag question: Question 10

Question 10

1 pts

How much will the monthly depreciation expense be for the Tables and Chairs

Group of answer choices

$42

$40

$38

$44

Flag question: Question 11

Question 11

1 pts

For January, how much was Maria's total Gross Margin % (To nearest 1/10th of a percent)?

Group of answer choices

Between 49.1% and 50.1%

Between 50.2% and 51.2%

Between 48.0% and 49.0%

Between 51.3% and 52.3%

Flag question: Question 12

Question 12

1 pts

For January, how much was Maria's total Marketing Expense (Ads, Signage, and Web Page) (to nearest dollar)?

Group of answer choices

Between $1,680 and $1,700

Between $1,440 and $1,460

Between $1,600 and $1,620

Between $1,200 and $1,220

Flag question: Question 13

Question 13

1 pts

For January, how much was Maria's total COGS Labor (to nearest dollar)?

Group of answer choices

Between $1,870 and $1,900

Between $2,030 and $2,060

Between $1,790 and $1,820

Between $1,950 and $1,980

Flag question: Question 14

Question 14

1 pts

For January, how much was Maria's total Utilities Expense (to nearest dollar)?

Group of answer choices

Between $400 and $410

Between $360 and $370

Between $380 and $390

Between $340 and $350

Flag question: Question 15

Question 15

1 pts

For January, how much was Maria's total Insurance Expense (to nearest dollar)?

Group of answer choices

Between $460 and $470

Between $420 and $430

Between $400 and $410

Between $440 and $450

Flag question: Question 16

Question 16

2 pts

For January, how much was Maria's total Taxable Income (to nearest dollar)?

Flag question: Question 17

Question 17

2 pts

For January, how much was Maria's total Net Income % (To nearest 1/10th of a percent)?

Flag question: Question 18

Question 18

2 pts

For January, how much was Maria's total Tax Expense (to nearest dollar)?

Flag question: Question 19

Question 19

2 pts

For January, how much was Maria's total Net Income (to nearest dollar)?