Scenario One: "What if" Analysis for adding flavored ice coffees.Your client is unsure if she should sell flavored ice coffee. She thinks she can sell a coffee toevery second customer and it seems to be lucrative because the coffee sells for $3.75 each andcosts him only $1.70 to purchase.Unfortunately your client is afraid that he would cannibalize his soft drink sales with the coffeecustomers (one soft drink less for every coffee sold). It will cost him $5,250 to purchase theI equipment and insurance costs would rise by another $175 per month due to the hot equipmentneeded to make the coffee.What is your recommendation: Should your client offer flavored coffee to her customers?Scenario Two: "What if" AnalysisYour client would like to consider adding ice cream cakes to the list of items available forsale. She is wanting to offer cakes with customized cake, ice cream decorations.She thinks she can sell 20 small cakes a week and 25 large cakes a week. It seems to be lucrativebecause the small cake is $18.95 and the large cake is $28.95. Costs are $6.45 per small cakeand $9.40 per large cake.It will cost her $3,500 to purchase the equipment and insurance costs would rise by another$375 per month due to the hot equipment needed to make the cakes.What is your recommendation? Would it be profitable to sell the cakes?

Note: “Since you have asked multiple questions, we will solve the first question for you. If you…

Answered: Scenario One: "What if" Analysis for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Scenario Two: "What if" Analysis Your client would like to consider adding ice cream cakes to the list of items available for sale. She is wanting to offer cakes with customized cake, ice cream decorations. She thinks she can sell 20 small cakes a week and 25 large cakes a week. It seems to be lucrative because the small cake is $18.95 and the large cake is $28.95. Costs are $6.45 per small cake and $9.40 per large cake. It will cost her $3,500 to purchase the equipment and insurance costs would rise by another $375 per month due to the hot equipment needed to make the cakes. What is your recommendation? Would it be profitable to sell the cakes?
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