Question

The Loft Etc. Store near the Academy of Arts sells all sorts of academic supplies and university memorabilia. One section of the store has been converted to sell sundries, toiletries, packaged food items and beverages, much like a 7-Eleven. You are the store manager for The Loft Etc. The store owner, Victoria, noticed that there are several sandwich places near the campus  that deliver food to the dorms.  She asked you to evaluate the feasibility of adding the sandwich business to the store. It will be very difficult to make the sandwiches at the store due to limited kitchen space and health permits requirements. You are considering to buy frozen pre-made sandwiches and heat them in the oven. You would need a freezer to store the pre-made sandwiches and an oven. The estimated the cost of a new freezer is $12,000 and the oven costs $15,000. You found a wholesaler willing to sell the pre-made frozen sandwiches for $2.85 each. You also estimated that the store will incur labor and packaging cost of $0.90 for each sandwich. You did some research and found out that you can sell the sandwiches for $8.95 each. 

Prepare a proposal for Victoria. In your report, make sure to address the following:

  1. How many sandwiches would have to be sold for the sandwich business at The Loft Etc. to break even? 
  2. If Victoria sells 20 sandwiches a day, how many days would it take to break-even?
  3. Victoria expects the other sandwich places to lower their prices if they experience lower sales. After 30 days, if Victoria lowers the sandwich price to $7.95 to keep demand at 20 sandwiches per day, as she expects, what will the new break-even point be?

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Cost Volume Profit Analysis

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