Case Studies -
Instructions: Read the cases below and answer the required questions.
CVP Case Study
Yummy Juices is a juice shop located in downtown Miami. The owner is considering the purchase of a new juicer to preserve her customer base in the market. The shop is experiencing increased difficulty in competing with juice chains such as Jumba Juice that offer customers a wider variety of specialty juices and mixes. The shop is open weekdays only. The cost of the new machine is $50,000. The selling price of the new juice mixes will be $2.00 per cup, and the variable cost per cup is $.50.
Required:
1. What is the number of juices per day that must be sold to achieve break even?
2. Upon further investigation, the owner learns that the new machine requires substantial maintenance, which will increase the variable cost by $.50 per juice. How would this information affect your answer?
3. What other factors should the owner consider before making the final decision to purchase the machine?
Differential Analysis Case Study
Madeira Travel Services provides travel agents access to sophisticated travel information and analysis systems over the Web. The company combines these tools with access to benchmarking data, including e-mail and wireless communications, so that travel agents can instantly evaluate airline fares and hotel rates.
Madeira Travel Services; President Joey Madeira is happy with the company's growth. To better focus on client service, Madeira is considering outsourcing some functions. CFO Tom Lee suggests that the company's e-mail may be the place to start. Madeira asks Lee to identify the costs related to Madeira Travel Services' in-house Microsoft Exchange mail application, which has 2,300 mailboxes. This information is below
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Variable Costs
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Per mailbox per month
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E-mail license
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$7
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Virus protection license
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$1
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Other variable costs
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$4
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Fixed Costs
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Computer hardware costs
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$94,300 per month
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$8,050 monthly salary for two information technology staff members who work only on e-mail
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$16,100 per month
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Required: Suppose for an additional $5 per mailbox per month, the outsourcer would provide virus protection, quarantine, and content-management services, which would eliminate Madeira's need for IT person and virus protection. Should they accept the additional services?