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Scenario One: "What if" Analysis for adding flavored Ice coffees. Your client is unsure if she should sell flavored ice coffee. She thinks she can sell a coffee to every second customer and it seems to be lucrative because the coffee sells for $3.75 each and costs him only $1.70 to purchase. Unfortunately your client is afraid that he would cannibalize his soft drink sales with the coffee customers (one soft drink less for every coffee sold). It will cost him $5,250 to purchase the I equipment and insurance costs would rise by another $175 per month due to the hot equipment needed to make the coffee. What is your recommendation: Should your client offer flavored coffee to her customers?

Scenario One: "What if" Analysis for adding flavored Ice coffees. Your client is unsure if she should sell flavored ice coffee. She thinks she can sell a coffee to every second customer and it seems to be lucrative because the coffee sells for $3.75 each and costs him only $1.70 to purchase. Unfortunately your client is afraid that he would cannibalize his soft drink sales with the coffee customers (one soft drink less for every coffee sold). It will cost him $5,250 to purchase the I equipment and insurance costs would rise by another $175 per month due to the hot equipment needed to make the coffee. What is your recommendation: Should your client offer flavored coffee to her customers?

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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**Scenario One: “What If” Analysis for Adding Flavored Ice Coffees** Your client is unsure if she should sell flavored ice coffee. She thinks she can sell a coffee to every second customer and it seems to be lucrative because the coffee sells for $3.75 each and costs him only $1.70 to purchase. Unfortunately, your client is afraid that he would cannibalize his soft drink sales with the coffee customers (one soft drink less for every coffee sold). It will cost him $5,250 to purchase the equipment and insurance costs would rise by another $175 per month due to the hot equipment needed to make the coffee. What is your recommendation: Should your client offer flavored coffee to her customers? **Scenario Two: “What If” Analysis** Your client would like to consider adding ice cream cakes to the list of items available for sale. She is wanting to offer cakes with customized cake, ice cream decorations. She thinks she can sell 20 small cakes a week and 25 large cakes a week. It seems to be lucrative because the small cake is $18.95 and the large cake is $28.95. Costs are $6.45 per small cake and $9.40 per large cake. It will cost her $3,500 to purchase the equipment and insurance costs would rise by another $375 per month due to the hot equipment needed to make the cakes. What is your recommendation? Would it be profitable to sell the cakes?
Transcribed Image Text:**Scenario One: “What If” Analysis for Adding Flavored Ice Coffees** Your client is unsure if she should sell flavored ice coffee. She thinks she can sell a coffee to every second customer and it seems to be lucrative because the coffee sells for $3.75 each and costs him only $1.70 to purchase. Unfortunately, your client is afraid that he would cannibalize his soft drink sales with the coffee customers (one soft drink less for every coffee sold). It will cost him $5,250 to purchase the equipment and insurance costs would rise by another $175 per month due to the hot equipment needed to make the coffee. What is your recommendation: Should your client offer flavored coffee to her customers? **Scenario Two: “What If” Analysis** Your client would like to consider adding ice cream cakes to the list of items available for sale. She is wanting to offer cakes with customized cake, ice cream decorations. She thinks she can sell 20 small cakes a week and 25 large cakes a week. It seems to be lucrative because the small cake is $18.95 and the large cake is $28.95. Costs are $6.45 per small cake and $9.40 per large cake. It will cost her $3,500 to purchase the equipment and insurance costs would rise by another $375 per month due to the hot equipment needed to make the cakes. What is your recommendation? Would it be profitable to sell the cakes?
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