Activity 18-5: The Case of Mallory's LemonadeStand (B)It is March 2019 and Mallory has come a long way since last summer. Herlemonade was a hit – everyone raved about her secret formula (she addedsome special spices suggested by her grandmother). When Mark Cuban(billionaire investor) happened to drive through the neighborhood he hada cup of Mallory's lemonade and offered to invest in the company. SoMallory's Lemonade Stand Lemonade will soon be found in a limitednumber of local Whole Foods Stores. Mallory had to figure out somepricing. She started with the knowledge that retailers would want to sellher 20 oz bottles for $2.00 at retail.Mallory figured her costs as follows:•$10,000 in fixed costs for various costs including some localadvertising she to support Whole Foods.· A co-packer (company that manufactures food products tospecifications) will charge $.50 for each 20 oz bottle – includingbottles, packages, and delivery.• Mallory assumes she can sell 30,000 bottles.• Mallory plans to charge Whole Foods $1.00 each for the bottles.Whole Foods will charge $2.00.• Using average cost pricing, she is counting on a $5000 profit.1. Assuming the numbers shown here, what is Whole Foods markuppercent on each bottle of Mallory's Lemonade Stand Lemonade?2. Using Mallory's projected sales of 30,000 bottles, calculate Mallory's:a) average fixed cost, b) average variable cost, and c) total profit?3. What is Mallory's profit if sales only turn out to be 15,000 bottles?

Markup Percentage = ((Selling Price - Cost)/Costs) * 100 Fixed and Variable cost - We know that…

Answered: a) average fixed cost, b) average…

Business

Accounting

a) average fixed cost, b) average variable cost, and c) total profit?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: RUE OR FALSE Net income under GAAP highlights differences between variable and fixed costs.

A: Answer: Net income under GAAP highlights differences between variable and fixed costs. The…

Q: What is Unit-Profit or Unit-Cost Calculation?

A: Cost: It is the economic value of resources incurred by a firm to manufacture a product or render…

Q: Describe and apply the lower-of-cost-or-net realizable value rule.

Q: How does the lower of cost or market relate to profit margins?

A: Answer: The lower cost or market implies that, depending on how historical costs and market costs…

Q: What would be the outputs for the given assumptions: Total revenue: Total costs: Total profit:

A: Break Even Point is that point at which there is no profit & loss would arise. At break even…

Q: Q 7: prices What is meant by Transfer price and why transfer are needed?

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Describe analyzing of profit using contribution margin.

A: The contribution margin ratio is the percentage of difference in a company's sales and variable…

Q: List the most important assumptions of cost-volume-profit analysis.

A: Cost Volume Profit Analysis (CVP Analysis): This analysis is helpful in determining that how any…

Q: Describe following:* Market approach* Income approach* Cost approach

A: Market Approach: Market approach is a method used to assess the value of an asset depending on the…

Q: What effect do minor deviations from the EOQ have on totalinventory cost?

A: Minor variations from the EOQ will not in general highly affect the total inventory cost except if…

Q: On a cost-volume-profit graph, when the Total Cost line is higher than the Total Revenue line, the…

A: Solution:- Cost-volume-profit graph is the graph which measures the loss, profit and break-even…

Q: Which of the following would be considered as a limiting factor to maximize the profit? O a. Book…

A: Limiting factors can be defined as the constraints in availability of production resources in order…

Q: Contribution margin is selling price plus unit cost. True or false

A: Contribution Margin is the income before deduction of any fixed cost. Contribution margin = Selling…

Q: ***

A: Marginal profit is profit on additional units units. Profit can be calculated by deductions of cost…

Q: Understand and apply the lower-of-cost-or-net realizable value rule.

Q: What ratio, profit, target, or margin is the most important?

A: Accounting Accounting refers to the keeping of a systematic record of business transactions…

Q: iable costs in the context of cost-volume-profit (CPV) analysis? b. Fixed costs in the context of…

A: Cost volume profit analysis is very important for the companies because it tells them that whether…

Q: Contribution margin is the difference between total revenue and total variable costs. Select one: O…

A: The contribution margin is calculated by subtracting total variable costs from total revenue. The…

Q: he total mixed cost function

A: Mixed cost is a cost that contains both fixed and variable cost.Mixed cost algebric formula is as…

Q: Which of the following best describes a variable cost? A cost that: a. Represents a fixed…

A: Variable cost is the cost incurred during the production of units which will be directly…

Q: What is the difference between g Operating Margin and Net Margin?

Q: Vla Gelato is a popular neighborhood gelato shop. The company has provided the following cost…

A: The flexible budget is a budget which is not rigid in nature and is adjusted for the actual units…

Q: Describe the Unit-Profit or Unit-Cost Calculation?

A: A unit cost is a net expense a firm has incurred to manufacture, store, and sell one unit of a…

Q: How does the contribution margin affect the cost-volume-profit analysis?

A: Cost Volume Profit analysis means the breakeven analysis which generally used to determine the break…

Q: 7. Which of the following is a correct formula to calculate contribution margin ratio (CM ratio)?…

A: The break even sales are the sales where business earns no profit no loss during the period.

Q: he Thotho income statement variable costing

A: In variable costing income statement, the sale revenue is reduced by all the variable cost to arrive…

Q: what would be the difference in gross margin between fifo and lifo cost flow assumptions

A: The difference in gross margin between FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) cost…

Q: 2. The following total cost graphs indicate which type of cost behavior? A. VARIABLE COST B. FIXED…

A: Cost behavior refers to how costs change as the level of activity or output changes within a…

Q: How should mixed costs be classified in cost, volume, and profit analysis?

A: Based on the cost behaviour costs are classified as fixed costs , variable costs and mixed costs.…

Q: Explain the Cost of Revenue vs. COGS.

A: INTRODUCTION: All costs and expenses directly associated to the manufacture of goods are included in…

Q: How is cost-volume-profit analysis different from profit planning?

A: Cost Volume Profit Analysis - This is an Analysis which provides the details How it will Effect the…

Q: simple cost analysis method to identify fixed costs and variable costs in a linear cost function is…

A: High low method is method which separates the elements of fixed cost and variable cost from the…

Question

Activity 18-5: The Case of Mallory's Lemonade
Stand (B)
It is March 2019 and Mallory has come a long way since last summer. Her
lemonade was a hit – everyone raved about her secret formula (she added
some special spices suggested by her grandmother). When Mark Cuban
(billionaire investor) happened to drive through the neighborhood he had
a cup of Mallory's lemonade and offered to invest in the company. So
Mallory's Lemonade Stand Lemonade will soon be found in a limited
number of local Whole Foods Stores. Mallory had to figure out some
pricing. She started with the knowledge that retailers would want to sell
her 20 oz bottles for $2.00 at retail.
Mallory figured her costs as follows:
•$10,000 in fixed costs for various costs including some local
advertising she to support Whole Foods.
· A co-packer (company that manufactures food products to
specifications) will charge $.50 for each 20 oz bottle – including
bottles, packages, and delivery.
• Mallory assumes she can sell 30,000 bottles.
• Mallory plans to charge Whole Foods $1.00 each for the bottles.
Whole Foods will charge $2.00.
• Using average cost pricing, she is counting on a $5000 profit.
1. Assuming the numbers shown here, what is Whole Foods markup
percent on each bottle of Mallory's Lemonade Stand Lemonade?
2. Using Mallory's projected sales of 30,000 bottles, calculate Mallory's:
a) average fixed cost, b) average variable cost, and c) total profit?
3. What is Mallory's profit if sales only turn out to be 15,000 bottles?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1 Formula for Mark up, Concept of fixed and Variable cost

VIEW

Step 2 Whole Foods Markup Percentage

VIEW

Step 3 Calculation of Average Fixed Cost , Average Variable Cost and Total profit

VIEW

Step 4 Profit at sales level of 15,000

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Define the term an incremental benefit-cost ratio?
2. What is cost-volume-profit analysis and what are the important assumptions of this analysis?
example of lower of cost or net realizable value and explain
Which of the following is NOT considered in cost-volume-profit analysis? Variable costs Fixed costs Opportunity costs Mixed costs
In what sense is the WACC an average cost? A marginal cost?
Which of the following describes the behavior of total variable and total fixed costs when level of production increases?
3. What do you mean by fixed cost and variable cost.
(Variable cost = Total cost - Fixed cost - Net profit) you have not consider the net profit in the calculation. I think it should be added right ?
Define the term ‘profit–volume ratio’ and explain how it can be used for cost–volume–profit analysis.
The formula for Contribution is Select one: a. Fixed cost + loss b. Sales - Variable cost c. Fixed cost - Profit d. Sales + Variable cost
Fixed costs, variable costs, and revenues are all included in profitability analysis? Select one: O True O False