Jen and Larry's Frozen Yogurt Company
Jen and Larry’s Frozen Yogurt Company The mini case of Jen and Larry’s Frozen Yogurt Company provides the different operating results, particularly the EBDAT, NOPAT, EBDAT breakeven revenue and NOPAT breakeven revenue of the company given the estimated revenue and expenses during 2009. At first, the number of units is calculated based on projected revenue of $1.2million, which is followed by expected EBDAT and NOPAT. Next, EBDAT and NOPAT are calculated based on worst and best case situations with respective projected revenue was $600,000 and $1.5. The worst case situation produces negative EBDAT and NOPAT and the best case produces positive results. To analyse the company’s survival position, EBDAT breakeven survival revenue and NOPAT breakeven revenues are computed under different hypothetical scenario of changes breakeven drivers like the VCRR and fixed cost. It can be seen that a direct relationship exist between the contributing margin and break even revenues and between fixed cost and break even revenues. Typically, there will be trade-off between fixed costs and variable cost and the company analyses the breakeven drivers to determine which would provide the best options Solution to Minicase- Jen and Larry's Yogurt Company ANumber of units to be sold is 400,000 to reach the expected revenue of $1.2millionB2009Number of units sold 400,000 Revenue $ 1,200,000 Cost of goods sold $ 600,000 Gross
Profit $ 600,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 -Interest exp $ 15,000 EBDAT $ 205,000 EBDAT as percentage of Revenues17.08%C2009Revenue $ 1,200,000 Cost of goods sold (50% of Revenue) $ 600,000 Gross Profit $ 600,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 EBIDA $ 92,500 -Depreciation expense $ 50,000 EBIT $ 170,000 Taxes (25% of taxable income) $ 42,500 NOPAT $ 127,500 NOPAT as percentage of Revenues10.63%D20092009Revenue $ 600,000 Revenue $ 600,000 Cost of goods sold (50% of Revenue) $ 300,000 Cost of goods sold (50% of Revenue) $ 300,000 Gross Profit $ 300,000 ...
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Profit $ 600,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 -Interest exp $ 15,000 EBDAT $ 205,000 EBDAT as percentage of Revenues17.08%C2009Revenue $ 1,200,000 Cost of goods sold (50% of Revenue) $ 600,000 Gross Profit $ 600,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 EBIDA $ 92,500 -Depreciation expense $ 50,000 EBIT $ 170,000 Taxes (25% of taxable income) $ 42,500 NOPAT $ 127,500 NOPAT as percentage of Revenues10.63%D20092009Revenue $ 600,000 Revenue $ 600,000 Cost of goods sold (50% of Revenue) $ 300,000 Cost of goods sold (50% of Revenue) $ 300,000 Gross Profit $ 300,000 Gross Profit $ 300,000 - Administrative expense $ 180,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 -Marketing expense $ 200,000 -Interest exp $ 15,000 EBIDA $ (80,000)EBDAT $ (95,000)-Depreciation expense $ 50,000 EBDAT as percentage of Revenues-15.83%EBIT $ (130,000)Taxes (25% of taxable income) $ 32,500 NOPAT $ (97,500)NOPAT as percentage of Revenues-16.25%E20092009Revenue $ 1,500,000 Revenue $ 1,500,000 Cost of goods sold (50% of Revenue) $ 750,000 Cost of goods sold (50% of Revenue) $ 750,000 Gross Profit $ 750,000 Gross Profit $ 750,000 - Administrative expense $ 180,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 -Marketing expense $ 200,000 -Interest exp $ 15,000 EBIDA $ 370,000 EBDAT $ 355,000 -Depreciation expense $ 50,000 EBDAT as percentage of Revenues23.67%EBIT $ 320,000 Taxes (25% of taxable income) $ 80,000 NOPAT $ 240,000 NOPAT as percentage of Revenues16.00%FSR=[CFC/(1-VCRR]Cost of goods sold is the only variable cost and remain constant 50% of revenue Annual cash fixed costs are:Administrative expense $ 180,000 Marketing expense $ 200,000 Interest exp $ 15,000 Total CFC $ 395,000 Survival Revenue = 395,000/(1-0.50) = $790,000The EBDAT Breakeven point happens at a level of survival revenue of $790,000The number of cups of yogurt to be sold at this breakeven point would be 263,333GNR=[TOFC/(1-VCRR]Cost of goods sold is the only variable cost and remain constant 50% of revenue Total Operating fixed costs are:Administrative expense $ 180,000 Marketing expense $ 200,000 Depreciation expense $ 50,000 Total TOFC $ 430,000 NOPAT Breakeven Revenue = 430,000/(1-0.50) = $860,000The NOPAT Breakeven point happens at a level of NOPAT Breakeven Revenue of $860,000The number of cups of yogurt to be sold at this breakeven point would be 286,666HWhen cost price dropped to $1.6/cup of yogurtVCRR = 1.6/3 =53%SR=[CFC/(1-VCRR]Cost of goods sold change to 53% of revenue Annual cash fixed costs are:Administrative expense $ 180,000 Marketing expense $ 200,000 Interest exp $ 15,000 Total CFC $ 395,000 Survival Revenue = 395,000/(1-0.53) = $840,425.53The EBDAT Breakeven point happens at a level of survival revenue of $840,425.53When cost price dropped to $1.4/cup of yogurtVCRR = 1.4/3 =47%SR=[CFC/(1-VCRR]Cost of goods sold change to 47% of revenue Annual cash fixed costs are:Administrative expense $ 180,000 Marketing expense $ 200,000 Interest exp $ 15,000 Total CFC $ 395,000 Survival Revenue = 395,000/(1-0.53) = $745,283The EBDAT Breakeven point happens at a level of survival revenue of $745,283ISR=[CFC/(1-VCRR]Cost of goods sold is the only variable cost and remain constant 50% of revenue Annual cash fixed costs are:Administrative expense $ 180,000 Marketing expense (with additional $30,000) $ 230,000 Interest exp $ 15,000 Total CFC $ 425,000 Survival Revenue = 425,000/(1-0.50) = $850,000The EBDAT Breakeven point happens at a level of survival revenue of $850,000NR=[TOFC/(1-VCRR]Cost of goods sold is the only variable cost and remain constant 50% of revenue Total Operating fixed costs are:Administrative expense $ 180,000 Marketing expense (with additional $30,000) $ 230,000 Depreciation expense $ 50,000 Total TOFC $ 460,000 NOPAT Breakeven Revenue = 460,000/(1-0.50) = $920,000The NOPAT Breakeven point happens at a level of NOPAT Breakeven Revenue of $920,000JSR=[CFC/(1-VCRR]Cost of goods sold has been changed to 53.57% of revenue (1.5/2.8 = 53.57%)Annual cash fixed costs are:Administrative expense $ 180,000 Marketing expense $ 200,000 Interest exp $ 15,000 Total CFC $ 395,000 Survival Revenue = 395,000/(1-0.5357) = $850,743The EBDAT Breakeven point happens at a level of survival revenue of $850,743NR=[TOFC/(1-VCRR]Cost of goods sold has been changed to 53.57% of revenue (1.5/2.8 = 53.57%)Total Operating fixed costs are:Administrative expense $ 180,000 Marketing expense $ 200,000 Depreciation expense $ 50,000 Total TOFC $ 430,000 NOPAT Breakeven Revenue = 430,000/(1-0.5357) = $926,125The NOPAT Breakeven point happens at a level of NOPAT Breakeven Revenue of $926,125