a The Case Now a days you can see young people are more and more into the idea of entrepreneurship. It could be the life

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A The Case Now A Days You Can See Young People Are More And More Into The Idea Of Entrepreneurship It Could Be The Life 1 (69.32 KiB) Viewed 37 times

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a The Case Now a days you can see young people are more and more into the idea of entrepreneurship. It could be the lifestyle, freedom at workplace, the flexibility in the working hours, or the freedom of controlling your own finances. Eventually many make the decision every year to leave their job to set up their own dream business venture. Today it is your tum to decide, should you quit your job and take on the below business opportunity or not? The uncertainty involved in a decision like that is part of the risk that you as an intrapreneur will take when you decide to start your own business, it might be scary, but it is fun The uncertainty involved in making the decision about profit, sales volume, cost, etc. should not hold you back and prevent you from moving forward, an educated risk based on estimation known as CVP analysis will help you in studying your business opportunity You have the opportunity to open a Smoothy booth on the beautiful city walk of Dubai. You and your friend studied the existing market and done some research on the costs required to be incurred and operating the business. A unique feature that you will be offering to your client is a Smoothie served in an edible cup. Your research outcomes came as follow: To penetrate the market, you believe that a price of 25.00 AED per smoothy is appropriate. The cost of materials and ingredients to prepare the smoothies. Ingredients Amount needed per cup Milk ( 20 AED for 1 gallon) 80 gm per smoothie Plain yogurt (12AED for 2kg) 80 gm per smoothie Sugar (30 AED for 10kg) 8 gm per smoothie Fruits assorted (100AED for Skg) 80 gm per smoothie Edible cups (2AED per cup) 1 cup per smoothie Straws (20 AED for 500) pes per smoothie Initial Costs: • Equipment: Smoothie blender: 1080 AED per machine x 3 machines $3240 expected life is 2 years • Equipment: Refrigerator/freezer. AED 2400. Expected life is 10 years. Tables for customers to sit outside: 540 per set x 5=2700AED. Expected life is 3 years • Countertops: 1200AED. Expected life is 10 years Booth rental: 2000AED a month Cleaning and other miscellaneous supplies: 200AED a month Sign for the booth 440 AED Total Initial Costs = 12,180AED. Between you and your friend and a support from your parents you managed to have the required fixed cost covered for the first 3 months. Total investments by owners 60,000 AED Employees: To run the business, you and your partner will take tums working with two other part-time employees, the monthly salary for each will be 1,200AED per month. .
Other costs: Direct materials costs will be covered by the owner's capital. Required: To answer the questions below, you will need to make assumptions, and add change fixed and variable costs (please clearly indicate all assumptions made). 1) Using the information above you need to determine how many smoothies you will need to sell to break even. (For simplicity keep all costs on monthly basis throughout your analysis). 2) How much salary can you take for yourself and your partner friend and how many smoothies you need to sell to break even. 3) Should you leave your job to open the Smoothie shack? ANSWERS TO THE CASE Fixed costs: those that stay the same when the volume of activity changes Monthly fixed costs Amount Total monthly fixed cos Variable Costs per unit: Variable costs: those that vary in accordance with the volume of activity Cost per cup Ingredient Milk 20 AED for l gallon) Plain yogurt (12AED for 2kg) Sugar (30 AED for 10kg) Fruits assorted (100AED for Skg) Edible cups (ZAED per cup) Straws (20 AED for 500) Total Variable cost / smoothie Amount needed/ cup 100 ml per smoothie 80 gm per smoothie 8 gm per smoothie 80 gm per smoothie cup per smoothie 1 pes per smoothie 1 gal = 3,785.41 g wt.
Sales price per unit Variable cost per unit Contribution margin per unit Total Fixed costs Breakeven point - FC/CM 1) For your smoothie booth to break even you will need to sell 2) If you decide to add a salary for you and your partner of your fixed cost will increase by a month. New fixed cost: AED monthly New BE- smoothies per month ...smoothies a month. a month each, then Statement of income at breakeven: (no owners allowance) Total Sales 25 Total Variable costa Contribution margin Total Fixed costs Net income Statement of income at new breakeven point: (with owners' salaries) Total Sales a 25 Total Variable costa Contribution margin Total Fixed costs (with salaries) Net income 3) Should you leave your job to open the Smoothie shack?