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Homework answers / question archive / Aliyah Ponton October 18, 2016 Assignment 3 – 6 MALARIE’S LEMONADE STAND COST VOLUME PROFIT ANALYSIS, PART II (contribution margin income statement – multiple product CVP – operating leverage - constraints)   Malarie runs a drink stand where she sells 2 products – lemonade and smoothies

Aliyah Ponton October 18, 2016 Assignment 3 – 6 MALARIE’S LEMONADE STAND COST VOLUME PROFIT ANALYSIS, PART II (contribution margin income statement – multiple product CVP – operating leverage - constraints)   Malarie runs a drink stand where she sells 2 products – lemonade and smoothies

Math

Aliyah Ponton

October 18, 2016

Assignment 3 – 6

MALARIE’S LEMONADE STAND

COST VOLUME PROFIT ANALYSIS, PART II

(contribution margin income statement – multiple product CVP – operating leverage - constraints)

 

Malarie runs a drink stand where she sells 2 products – lemonade and smoothies.  The following budgeted information is available per unit of each product:

 

 

Malarie has the following fixed costs per season as well:

 

 

  1. Malarie wants to approach her father for money with which to purchase a new deluxe blender.  She projects sales for the upcoming season of 300 lemonades and 200 smoothies.  Prepare a pro-forma income statement in traditional and contribution-margin formats.  WHY is the contribution-margin format better for decision making?

 

 

  1. Malarie advertises by placing signs at strategic points in business and around the neighborhood.  Which product should she emphasize?  WHY?
  2. What’s the total number of drinks (lemonades PLUS smoothies) that Malarie needs to sell in order to break even?  At this point, assuming the same product mix, how many are lemonade and how many are smoothies?
  3. Assume that Malarie actually sold 350 lemonades and 230 smoothies and showed a profit of $500.  What are your thoughts on her performance for the period?  Did she operate efficiently and control costs well? WHY?
  4. Assume that there is unlimited demand for both lemonade and smoothies and that Malarie could sell as many of either as she wished.   Her current blender, however, is kind of old and can only be used for 1 hour per day.  She wishes to maximize her profits.  How many of each drink should Malarie make per day and WHY?
  5. What if there was only demand for 100 lemonades?  NOW how many of each should Malarie make?  In plain English, what should be her general approach in this type of situation?  WHY?
  6. If sales go up by 10% for EACH, what will their new profit be?  What PERCENT INCREASE does this represent?

 

  1. WHY was the percentage increase in income different for Malarie and Sarah?

 

  1. Which lemonade stand is more risky?  WHY?
  2. Malarie’s business has grown and Malarie Enterprises now has separate drink and burger stands at two different locations. The following are the results for the previous period.

 

 

Assuming that Malarie’s product mix (between the two stands) stays the same, what is the breakeven point for Malarie Enterprises in sales revenues ($)?

  1. At this level, how much are the sales from the drink stand and burger stand separately?
  2. Assuming the same product mix, how much MORE revenues would Malarie need from burgers if she wanted to make an overall profit of $250?

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