For this exercise you will use the web pages for Costco.com. Suppose you have decided to start a small business selling snacks from vending machines. Lynn University has allowed you to place a vending machine in the Ritter Building. Rental for the space will cost $300 per month. You will purchase the vending machine and the snack products at Costco.
Assume the following for this machine at the Ritter Building:
You will purchase the cheaper of the two vending machines offered by Costco. This machine will be depreciated over three years on a straight line basis.
Delivery costs will be $100 per month.
You will sell Oreo Cookies, Cheese and Peanut Butter Crackers, Famous Amos Chocolate Chip Cookies, and Cheez-It Cracker Snacks. On average the costs of these snacks will be $.53 per unit.
The vending machine price for these snacks will be $1.00.
Other monthly costs are $150.
Your tax rate is 35 percent.
How much revenue each month does the machine need to produce for you to earn $300 after taxes each month? After making your computations does this seem like a good business venture for you?
Assume that instead of placing a machine at the Ritter Building, you will place a machine in the Library. For the purpose of this analysis assume the following:
You will purchase the more expensive vending machine, also depreciated over three years.
Delivery costs will be $150 per month.
Other monthly costs will be $200 per month.
In addition to selling the above snack items, you will also sell water and soft drinks, which on average will cost you $.60 per unit.
The vending machine price for the beverages will be $1.50. You expect to sell three beverages for each snack product.
The rental cost will remain at $300 per month.
The tax rate is still 35 percent.
How much revenue each month does the machine need to produce for you to earn $450 after taxes each month? After making your computations does this seem like a good business venture for you?