Make Up Assignment

Assignment 3

Jumanji Brewery

Jumanji Brewery is preparing to open in Kent, and the owners are trying to project monthly net profit and year-end net profit based on 12 months. The brewery has a retail sales unit – 16 oz. pints – and a wholesale sales unit – 1,984 oz. kegs. The pints will be sold for $6 and the kegs for $140. The variable cost per pint is $0.75 and the variable cost per keg is $85.00. In addition, the brewery incurs the following fixed costs per month:

Salaries | $2000 |

Rent | $3000 |

Depreciation Expense | $1500 |

Utilities | $500 |

Marketing Expense | $1000 |

Interest Expense | $500 |

1. Assuming that Jumanji can produce a total of 120,000 ounces per month, how many pints can they produce in a month? How many kegs can they produce in a month?

2. If in the first month, Jumanji expects to brew (and sell) 30% of their production capacity. They also expect that 60% of the beer they brew will be sold in pints and 40% will be sold in kegs. Calculate the net income for the first month.

3. Jumanji expects to increase their production capacity by 5% for each of the following months. Calculate the net income for the following 11 months. Assume the same 60% (pints) and 40% (kegs) split as in the previous question. How much profit they will have at the end of year one?

4. Now, just for fun, let’s assume Jumanji decides to run a promotion in Month 3 where they reduce the average price per pint by 40%. Further, they are considering giving all of their kegs away for free for the first four months to generate additional demand further down the road. They anticipate these promotional tactics will increase pint sales by 15% and keg sales by 12% in Months 9-12 (hint: multiply the forecasted number of units by these increases, don’t change the production capacity percentages you’ve used to actually forecast unit sales). How does this change their profitability at the end of year one? Would you recommend they implement these promotions?...