PART 3: BUDGETING FOR A SNOWIE BUSINESS Now assume the Snowie supplier increases the cost of a gallon of the Snowie syrup to US$8.00 (from its original cost of US$4.25). In response, you increase the selling price of a large Snowie to US$5.00. Selling price per large Snowie $ 5.00 Ice per Snowie $ 0.20 Spoon straw (need one per Snowie) $ 0.02 Styrofoam cup (need one per Snowie) $ 0.08 Napkin (need two per Snowie) $ 0.02 Servings per gallon of syrup 28 Cost per gallon of syrup (includes concentrate, preservative, and sugar) $ 8.00 Hourly rate for workers $ 10.00 Event registration fee per day $ 25.00 Electricity, insurance, maintenance, and permit costs per month $ 250.00 Kiosk rental cost per month $ 650.00 Purchase cost of two ice shavers (5-year life) $ 3,180.00 Purchase cost of a flavor station (5-year life) $ 1,080.00 a. Number of days you anticipate opening the kiosk per month 20 b. Number of hours you will work (no wages required) per day 6 c. Number of hours you will pay an employee to work in the kiosk per day 8 d. Number of Snowies you estimate you will sell on an average day 69 Prepare a budgeted contribution margin income statement for one month using the data given in Part 1 and the assumptions that you listed in Part 3. Provide a separate line for each variable cost and for each fixed cost. For Month Ended July 31 (students may choose different mon

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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INTRODUCTION
Snowie™, owned by Carl and Gordon Rupp, is a company
that provides training, equipment, and supplies for operating
a shaved ice business. Shaved ice is an ice-based refreshment
made by shaving a block of ice into a fluffy, snow-like ice.
The product is served in cups with flavored syrups added to
the ice. Due to its fine texture, shaved ice absorbs the syrup,
making each bite flavorful. Snowie does not sell franchises.
It sells a wide array of equipment and supplies, including ice
shavers, kiosks, carts, buses, syrups, cups, and other supplies
to independent operators.

PART 3: BUDGETING FOR A SNOWIE BUSINESS
Now assume the Snowie supplier increases the cost of a
gallon of the Snowie syrup to US$8.00 (from its original cost
of US$4.25). In response, you increase the selling price of a
large Snowie to US$5.00.

Selling price per large Snowie	$ 5.00

Ice per Snowie	$ 0.20
Spoon straw (need one per Snowie)	$ 0.02
Styrofoam cup (need one per Snowie)	$ 0.08
Napkin (need two per Snowie)	$ 0.02
Servings per gallon of syrup	28
Cost per gallon of syrup (includes concentrate, preservative, and sugar)	$ 8.00
Hourly rate for workers	$ 10.00
Event registration fee per day	$ 25.00
Electricity, insurance, maintenance, and permit costs per month	$ 250.00
Kiosk rental cost per month	$ 650.00
Purchase cost of two ice shavers (5-year life)	$ 3,180.00
Purchase cost of a flavor station (5-year life)	$ 1,080.00

a. Number of days you anticipate opening the kiosk per month	20
b. Number of hours you will work (no wages required) per day	6
c. Number of hours you will pay an employee to work in the kiosk per day	8
d. Number of Snowies you estimate you will sell on an average day	69

Prepare a budgeted contribution margin income
statement for one month using the data given in Part 1
and the assumptions that you listed in Part 3. Provide a
separate line for each variable cost and for each fixed cost.

For Month Ended July 31 (students may choose different months)

Sales revenue
Less variable expenses:
Ice expense
Spoon straws
Styrofoam cups
Napkins
Syrup
Total variable expenses
Total contribution margin
Less fixed expenses:
Wages for workers
Event registration fees
Kiosk rental cost
Depreciation - ice shavers
Depreciation - flavor station
Total fixed expenses
Operating income

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