Managerial Accounting Assignment
Project Narrative:
This summer you've decided to take on a new venture. After the spring semester ends, you're returning to your hometown for a few weeks. A local church is running its annual carnival and has offered you an opportunity to set up a booth. You have the chance to relive some of your favorite childhood food memories! In your booth space, you can sell any food item you wish (i.e. candied apples, cotton candy, poutine, lemonade, funnel cake, deep-fried Snickers). The carnival will run in the evenings for six days; each evening from 6:00 pm - 10:00 pm.
• As operator of this booth, you will need to buy all the materials, hire all of your labor (if needed), and pay 12.5% of your sales revenue to N&A Amusement Company and 12.5% of your sales revenue to the church.
• Additionally, you are required to pay the church a $200 rental cost (which includes utilities expense) for the booth space.
You are very excited to put your managerial accounting skills and other business courses to use during the summer. In order to make this opportunity a good use of your time, you need to determine the feasibility/profitability of this venture. If successful, a good portion of the money you earn in the summer can go towards your college education (or that much needed trip to someplace tropical!).
Project Requirements
A. Determine your financial goal for this one-week venture.
B. Briefly describe the product that you will sell at the carnival as well as all of the costs that you will have to incur during the week. On the Excel file (provided), classify each cost as variable, fixed, or mixed. For mixed costs, be sure to identify the variable and fixed components.
C. You will need to research all of your costs: direct materials, direct labor, and overhead involved in making your product. On the Excel file tell me your source for each of these costs (e.g. list websites where you found your information).
D. Perform market research to determine the appropriate price to charge for your product.
E. Before you begin any business venture, it is essential to perform a preliminary breakeven analysis. Your findings provide the basis for assessing the reasonableness of this business opportunity. An important part of this breakeven analysis is for you to determine the contribution margin per unit. From parts C and D, you will be able to determine your contribution margin per unit. After determining your contribution margin per unit, answer the following questions:
1. What is the contribution margin per unit of your product?
2. What is the contribution margin ratio?
3. What are the total fixed costs?
4. What is the sales volume at the breakeven point?
5. What is the sales revenue in dollars at the breakeven point?
6. What is the sales volume in units required to reach your financial goal?
7. What is the sales revenue in dollars required to reach your financial goal?
F. In addition to your calculations, summarize your results in one paragraph. Remember, your time to operate the booth has a value too; determine your earnings per hour to conclude if this opportunity is worth your time.
Attachment:- Job_Project.xls