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

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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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?
Transcribed Image Text: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?
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