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					Sal's Cupcake Factory (khanacademy.org/downloads/cupcakes.xlsx
Investment in Factory            $1,000,000                               Price/Quantity Sensitivity
Annual Capacity                   1,000,000 cupcakes/year
                                                                        -50%-0%                    0%-50%                  50%-100%
Cost per cupcake               $       1.00
Price charged per cupcake      $       3.00
Cupcakes sold in a year             500,000

Revenue                           1,500,000
Cost of goods sold                 (500,000)
Gross profit                      1,000,000
Overhead                           (500,000)




                                                            $1.10
                                                           $1.20
                                                           $1.30
                                                          $1.40
                                                          $1.50
                                                                       $1.60
                                                                               $1.70
                                                                                       $1.80
Operating income                    500,000




                                                                                               $1.90
                                                                                                       $2.00
                                                                                                               $2.10
                                                                                                                       $2.20
                                                                                                                               $2.30
                                                                                                                                       $2.40
Capacity utilization                    50%                                                Quantity
Return on asset                         50%    300,000      400,000    500,000               600,000                      700,000
                                      $1.10       -47%         -46%       -45%                  -44%                         -43%
                                      $1.20       -44%         -42%       -40%                  -38%                         -36%
                                      $1.30       -41%         -38%       -35%                  -32%                         -29%
                                      $1.40       -38%         -34%       -30%                  -26%                         -22%
                                      $1.50       -35%         -30%       -25%                  -20%                         -15%
                                      $1.60       -32%         -26%       -20%                  -14%                           -8%
                                      $1.70       -29%         -22%       -15%                    -8%                          -1%
                                      $1.80       -26%         -18%       -10%                    -2%                           6%
                                      $1.90       -23%         -14%         -5%                    4%                         13%
                       Price          $2.00       -20%         -10%          0%                  10%                          20%
                                      $2.10       -17%           -6%         5%                  16%                          27%
                                      $2.20       -14%           -2%       10%                   22%                          34%
                                      $2.30       -11%            2%       15%                   28%                          41%
                                      $2.40         -8%           6%       20%                   34%                          48%
                                      $2.50         -5%         10%        25%                   40%                          55%
                                      $2.60         -2%         14%        30%                   46%                          62%
                                      $2.70          1%         18%        35%                   52%                          69%
                                      $2.80          4%         22%        40%                   58%                          76%
s/cupcakes.xlsx)
tity Sensitivity
     100%           100%-150%




                                             800,000

                                            300,000
            $2.50
                    $2.60

                            $2.70

                                    $2.80




              800,000               900,000           1,000,000
                 -42%                  -41%                -40%
                 -34%                  -32%                -30%
                 -26%                  -23%                -20%
                 -18%                  -14%                -10%
                 -10%                    -5%                 0%
                   -2%                    4%                10%
                    6%                  13%                 20%
                  14%                   22%                 30%
                  22%                   31%                 40%
                  30%                   40%                 50%
                  38%                   49%                 60%
                  46%                   58%                 70%
                  54%                   67%                 80%
                  62%                   76%                 90%
                  70%                   85%                100%
                  78%                   94%                110%
                  86%                  103%                120%
                  94%                  112%                130%
Sal's Cupcakes                               Imran's Cupcakes
Investment in Factory           $1,000,000   Investment in Factory           $1,500,000
Annual Capacity                  1,000,000   Annual Capacity                  2,000,000
Cost per cupcake              $       1.00   Cost per cupcake            $         0.90
Price charged per cupcake     $       3.00   Price charged per cupcake   $         3.00
Cupcakes sold in a year            500,000   Cupcakes sold in a year            300,000

Revenue                         1,500,000    Revenue                            900,000
Cost of goods sold               (500,000)   Cost of goods sold                (270,000)
Gross profit                    1,000,000    Gross profit                       630,000
Overhead                         (500,000)   Overhead                          (700,000)
Operating income                  500,000    Operating income                   (70,000)


Capacity utilization                  50% Capacity utilization                      15%
Return on asset                       50% Return on asset                           -5%

Aggregate Capacity              3,400,000
Aggregate Demand                1,000,000
Aggregate Utilization                 29%
Aggregate Returan on Assets           17%
Vikram's Cupcakes
Investment in Factory           $500,000
Annual Capacity                  400,000
Cost per cupcake            $       1.10
Price charged per cupcake   $       3.00
Cupcakes sold in a year          200,000

Revenue                          600,000
Cost of goods sold              (220,000)
Gross profit                     380,000
Overhead                        (300,000)
Operating income                  80,000


Capacity utilization                 50%
Return on asset                      16%

				
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