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Background/Start-up Data

You are starting a made-to-order lemonade stand at the mall, set to open on April 1st. The mall's operating hours are:

- Monday through Saturday: 10:00 a.m. to 9:00 p.m.
- Sunday: Noon to 6:00 p.m.

Note that the mall is closed on Thanksgiving, Christmas, and New Year's Day.

Weekly Mall Traffic: 100,000 patrons (including children).

Market Research Analysis:
- Estimated sales: 15 to 25 cups of lemonade per hour.
- Initial estimate: An average of 20 cups per hour.

Product Details:
- Each cup holds 12 fluid ounces, filled with 10 ounces of lemonade.
- All sales are cash transactions.

Financial Details:
- Monthly rent: $4,200 plus 3.0% of total sales (includes utilities, garbage collection, custodial services, mall security, and liability insurance).
- Rental agreement: Month-to-month, personally guaranteed, with a one-month deposit of $4,200 required.
- All material purchases are paid in cash.

Material Costs:
- Lemons: $0.30 per lemon (2-3 lemons per cup, maximum storage one week refrigerated).
- Sugar: $0.19 per pound for 50 pounds (5 grams or one tablespoon per cup).
- Cups with lids: $0.10 each (quantity of 1,000 cups).
- Straws: $0.01 each (quantity of 5,000 straws).
- Napkins: $0.003 each (quantity of 10,000 napkins, two per customer).
- Bottled water: $1.00 per gallon (purchased in 50-gallon increments).

Staffing:
- Two attendants at the stand from 9:30 a.m. to 10:30 p.m. Monday through Saturday; one additional attendant after 3:00 p.m.
- Three attendants on Sunday from 11:30 a.m. to 7:30 p.m.
- One supervisor present at all hours; this could be you, a family member, or a partner.
- Desired salary for owner: $80,000 per year (including benefits).
- Attendant hourly rate: Minimum wage in Ohio plus 30% for benefits.
- Supervisor hourly rate: $21.00 (includes benefits).

Capital Equipment:
- Cost: $250,000 (includes equipment, counters, signage, refrigerators, ice-machine, cash register).
- Purchase with $50,000 cash and a bank loan for the remainder.
- Monthly loan payment: $XXXX, broken down into $X interest and $X principal.
- Equipment depreciation: Straight-line basis over 7 years (no salvage value).

Tasks:

A. Starting (Opening) Balance Sheet
Create a balance sheet showing starting assets (cash, equipment, inventory, etc.), liabilities (bank loan), and shareholder's equity (starting capital to cover inventory, employee pay, rent for the first 2 months, rent deposit, equipment, and first-year loan payments).

B. Projected Income Statement for First Month and End of Year 1
Based on sales estimates, calculate the operating cost for the first month and the first 12 months of operation.

Answer :

Remember to account for any other operating expenses not mentioned in the question, such as employee wages and benefits, utilities, and insurance.

Repeat the above steps for the first 12 months, considering the estimated sales for each month.

Additionally, consider the monthly rent of $4,200 plus 3.0% of the total sales as an operating cost.

A. Starting (Opening) Balance Sheet:
To create a balance sheet for your lemonade stand, you need to list your starting assets, liabilities, and shareholder's equity.

Assets:
1. Cash: This includes the cash you have available to start the business, such as your personal savings, investments, or funds from family and friends.
2. Equipment: Include the value of all the equipment, counters, signage, refrigerators, ice-machine, and cash register.

The total cost of the equipment is $250,000, with $50,000 paid in cash and the remainder financed through a bank loan.

Liabilities:
1. Bank Loan: This is the amount borrowed from the bank to purchase the equipment. You will need to calculate the terms of the loan, including the annual interest and monthly payments for 5 years.

Shareholder's Equity:
1. Starting Capital: This is the cash investment you make in the business and can come from your personal savings, investments, or contributions from family and friends.

The starting capital should be sufficient to cover the cost of starting inventory, employee salaries, rent for the first 2 months, the $4,200 rental deposit, $50,000 for equipment, and make payments on the equipment loan for the first year.

Any remaining cash will be shown as cash on hand on the balance sheet.

B. Projected Income Statement for First Month and End of Year 1:
Based on your sales estimates, you need to calculate the cost of operating the business for the first month and the first 12 months.

1. First Month:

Calculate the total sales by multiplying the estimated average cups sold per hour (20 cups) by the number of operating hours in a day and the number of operating days in a month. This will give you the total number of cups sold in the first month.

Determine the cost of lemons by multiplying the number of lemons needed for one cup (2-3 lemons) by the cost per lemon ($0.30) and the total cups sold in the first month.

Additionally, consider the monthly rent of $4,200 plus 3.0% of the total sales as an operating cost.

Calculate the net income for each month and add them together to determine the net income at the end of Year 1.

Remember to account for any other operating expenses not mentioned in the question, such as employee wages and benefits, utilities, and insurance.

To know more about Balance Sheet visit :

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