pleasehelp21
Mar 14, 2013, 02:59 PM
Situation:
John has asked you for advice regarding a new business. John is considering opening a canoe shop in the
Eugene area. He is in the preliminary stages of planning the venture and would like some help with some
“back of the envelope” calculations. He supplies you with the following cost estimates and data:
Shop Rental - $1040 per month for 2080 square feet. The location
Has some “window frontage” but also a bay door for
Loading and unloading boats.
Phone - $100 a month for business line and a few long distance
Calls.
Yellow Pages - $100 per month with a 12 month contract for a 1.5
Inch ad.
Other Utilities - $150 for water/sewer electric etc.
Hours of Operation - 10-7pm at least Wednesday through Sunday, would prefer
7 days a week.
Labor Costs - Minimum wage with no additional benefits.
Revenue Sources:
John feels that an average canoe will sell for $1500 with a contribution margin of $350 per canoe.
Additionally, he plans to carry the following items:
Life Jackets - Average Price of $65.00 per lifejacket
Paddles - Average Price of $25 per paddle
Other Accessories - $25 per boat sold on average
John will have a 100% markup or a 50% margin on all
Products other than canoes. He feels that for each
Canoe sale he will sell 2 lifejackets, three paddles and
$50 worth of accessories. John also feels that he
Would sell $250 per week in accessories to people
Who already own boats.
In talking with a canoe distributor John found out that about 1 in every 1000 thousand people in his
Metropolitan Statistical Area (MSA) are likely canoe owners. John is nervous when it comes to this estimate.
He knows that the distributor hauls 20 canoes to his warehouse from the plant every two weeks. The
Distributor serves all of the states west of the Rockies and British Columbia. Ultimately John thinks that it is
Possible that 325 canoe owners might replace a boat every 5 years and he hopes to capture 50% share of this
Market. Assume John can sell 33 canoes per year.
Requirements:
1. Prepare an estimated annual financial statement in contribution margin format.
2. Adjust his expense budget, projections, or other data to maximize his success.
3. Determine the sales volume necessary to breakeven
4. Counsel John on other issues or concerns that he needs to address.
5. Limit your write-up to 2 pages, but include supporting appendix pages showing your calculations.
John has asked you for advice regarding a new business. John is considering opening a canoe shop in the
Eugene area. He is in the preliminary stages of planning the venture and would like some help with some
“back of the envelope” calculations. He supplies you with the following cost estimates and data:
Shop Rental - $1040 per month for 2080 square feet. The location
Has some “window frontage” but also a bay door for
Loading and unloading boats.
Phone - $100 a month for business line and a few long distance
Calls.
Yellow Pages - $100 per month with a 12 month contract for a 1.5
Inch ad.
Other Utilities - $150 for water/sewer electric etc.
Hours of Operation - 10-7pm at least Wednesday through Sunday, would prefer
7 days a week.
Labor Costs - Minimum wage with no additional benefits.
Revenue Sources:
John feels that an average canoe will sell for $1500 with a contribution margin of $350 per canoe.
Additionally, he plans to carry the following items:
Life Jackets - Average Price of $65.00 per lifejacket
Paddles - Average Price of $25 per paddle
Other Accessories - $25 per boat sold on average
John will have a 100% markup or a 50% margin on all
Products other than canoes. He feels that for each
Canoe sale he will sell 2 lifejackets, three paddles and
$50 worth of accessories. John also feels that he
Would sell $250 per week in accessories to people
Who already own boats.
In talking with a canoe distributor John found out that about 1 in every 1000 thousand people in his
Metropolitan Statistical Area (MSA) are likely canoe owners. John is nervous when it comes to this estimate.
He knows that the distributor hauls 20 canoes to his warehouse from the plant every two weeks. The
Distributor serves all of the states west of the Rockies and British Columbia. Ultimately John thinks that it is
Possible that 325 canoe owners might replace a boat every 5 years and he hopes to capture 50% share of this
Market. Assume John can sell 33 canoes per year.
Requirements:
1. Prepare an estimated annual financial statement in contribution margin format.
2. Adjust his expense budget, projections, or other data to maximize his success.
3. Determine the sales volume necessary to breakeven
4. Counsel John on other issues or concerns that he needs to address.
5. Limit your write-up to 2 pages, but include supporting appendix pages showing your calculations.