Salty Pawz Financial Information

Sales + Revenue

For the last six months, Wanda’s sales have broken down as shown below. She has also provided you with her cost for each variety of treat.

Sales and Revenue Breakdown
Product % of Sales Sales Price COGS Contribution Profit Margin Weighted Profit Margin
Party Pooch 45% $20.00 $10.40 $9.60 48.00% 21.60%
Chicken Cuties 18% $15.00 $7.80 $7.20 48.00% 8.64%
Bison Bites 5% $21.00 $10.80 $10.20 48.57% 2.43%
Lamb Lovies 32% $24.00 $12.60 $11.40 47.50% 15.20%
Total Sales %
(Must equal 100%)		 100% Average
Profit Margin		 47.87%

Cost of Goods Sold

Wanda’s COGS include the packaging, labeling, the ingredients, and the time it takes to make the treats. Since she can bake them in big batches, her labor cost per unit is very low.

When Wanda ships her products, she charges just what it costs her. Shipping is done on a cost recovery basis and currently she doesn’t consider it in her income/expenses.

Price and Cost of Goods Sold by Unit
Product Unit Sales Price COGS
Chicken Cuties $1.25 $0.65
Bison Bites $1.75 $0.90
Lamb Lovies $2.00 $1.05

Monthly Expenses

Currently Wanda’s monthly expenses are:

Salty Paws Monthly Expenses
Expense Amount
Rent $0.00
Electricity $0.00
Telephone $100.00
Water/Sewer $0.00
Internet $60.00
Website $175.00
Salaries $0.00
Owner’s Draw $1000.00
Office Supplies $50.00
Loan Payment $0.00
Insurance $85.00
Other $0.00
Total Overhead $1,470.00

Sales Mix

Currently Wanda’s customers purchase her products at the following ratios:

Product Purchase Ratios
Product % of Sales
Party Pooch 45%
Chicken Cuties 18%
Bison Bites 5%
Lamb Lovies 32%
Total % of Sales 100%

Break Even Calculation

Average Sales per customer: $20.00
Total overhead (as in table above): $1,470.00
Average profit margin (as in table above): 47.87%

BREAKEVEN = Total Overhead divided by Average Profit Margin

[latex]\begin{align*} \text{Salty Paws Breakeven} &= \dfrac{$1,470.00}{47.87\%} \\ \\ &= \dfrac{$1,470.00}{\dfrac{47.87}{100}} \\\\ &= \dfrac{$1,470.00}{47.87} X 100 \\\\ & =$3,070.91 \end{align*}[/latex]

Based on her current monthly expenses and sales mix, this is what Wanda has to sell in order to break-even:

Product Breakeven in Dollars and Units
BREAKEVEN Party Pooch Chicken Cuties Bison Bites Lamb Lovies
Monthly In Dollars $3,070.91 $1,381.91 $552.76 $153.55 $982.69
In Units 69 37 7 41

Forecasting Supply and Demand

Wanda is at capacity for production out of her kitchen, so she believes that she is at the maximum income she can generate with her current structure. If Wanda changes her pricing structure, the following quantities demanded and quantities supplied will result.

Chicken Cuties
Response in Supply & Demand to Price Changes
Price ($) Demand (Q) Supply (Q)
$0.75 1000 500
$1.00 900 650
$1.25 800 800
$1.50 700 1000
$1.75 600 1400
$2.00 500 1500

 

Bison Bites
Response in Supply & Demand to Price Changes
Price ($) Demand (Q) Supply (Q)
$1.00 1200 500
$1.25 1100 600
$1.50 900 700
$1.75 800 900
$2.00 700 1000
$2.25 400 1400

 

Lamb Lovies
Response in Supply & Demand to Price Changes
Price ($) Demand (Q) Supply (Q)
$1.75 1500 800
$2.00 1400 900
$2.25 1200 1000
$2.50 1000 1200
$2.75 800 1400
$3.00 700 1600

 

Party Pooch
Response in Supply & Demand to Price Changes
Price ($) Demand (Q) Supply (Q)
$16.00 1400 600
$18.00 1200 700
$20.00 1100 800
$22.00 1000 1000
$24.00 900 1200
$26.00 800 1400

Income Information

Here is a summary of Wanda’s Salty Pawz income information for the past 6 months.

Salty Paws 6 Month Income Statement
Income:
    Party Pooch $                 40,500.00
    Chicken Cuties $                 16,200.00
    Bison Bites $                   4,515.00
    Lamb Lovies $                 28,800.00
    Total Income $                 90,015.00
Cost of Good Sold:
    Party Pooch $                 21,060.00
    Chicken Cuties $                   8,424.00
    Bison Bites $                   4,515.00
    Canine Craving $                 15,120.00
    Total Cost of Sales $                 49,119.00
GROSS PROFIT $                 40,896.00
Operating Expenses:
    Rent $                            –
    Electricity $                            –
    Telephone $                      600.00
    Water /Sewer $                            –
    Internet $                      360.00
    Website $                   1,050.00
    Salaries $                            –
    Owner’s Draw $                   6,000.00
    Office Supplies $                      300.00
    Loan Payment $                            –
    Insurance $                      510.00
    Other $                            –
    Total Expenses $                   8,820.00
NET INCOME BEFORE TAXES $                 32,076.00