Analyze leverage and activity ratios to review operating performance across organizations.
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At a recent get together, a longtime friend brought various types of cookies as a dessert. You had never tasted cookies of this high caliber before. Your friend never thought anything special of the cookies given she has been baking these since she was a small child. You shared that â€œCookies from Home,â€ a profitable company based in Tempe, Arizona, started by the encouragement of friends. Intrigued, your friend stated she would like to learn more. She would like some assistance in understanding how to start and operate a business of this nature. In exchange for a 2% ownership in the company, you agree to help her develop a business plan so that she can start her own business baking, marketing, and selling these cookies.
Write the portion of the business plan for this company addressing the following:
- Explain the process of determining the breakeven point for a business.
- Estimate monthly fixed costs to establish this company including equipment, rent, insurance, and other fixed costs.
- Estimate variable costs per batch of cookies, identifying all variable costs.
- Given the estimated costs, calculate the breakeven point and identify required sales revenue to reach this point.
- Based on the costs identified above, develop a realistic proforma income statement of a profitable business venture which would pay your friend a salary of $ 50,000 per year.