Economic Summary Pucker Up Lemonade Stand S3.docx

Economic Summary Pucker Up Lemonade Stand S3.docx - Running...

Info icon This preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Running Head: ECONOMIC SUMMARY 1 Economic Summary Pucker Up Lemonade Co. Stephani Christenson BUS 599 Introduction to Quantitative Principles Dr. Alfretta Earnest February 4, 2018
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
ECONOMIC SUMMARY 2 Economic Summary Pucker Up Lemonade Co. As the fair season comes to a close, Pucker Up Lemonade Co. has decided to perform an economic analysis of their performance in addition to the financial reviews that they have been conducting to determine if they should accept the offer from Maricopa County to become a permanent vendor or if the implicit expenses make long term investment in their stand unfeasible. To fully understand the ramifications for deciding to continue or close the business, the partners must review their accounting statements and financial ratios from all three seasons, as well as conduct an economic analysis by placing values on the experience that they have gained and what they would be forfeiting if they continue operating the stand. Description of the Business Revenues and Expenses James Pucker, a college student, and his silent partner, Uncle Phil, formed up Pucker Up Lemonade Co. three weeks ago so that James could get experience operating a business while on summer break from school. During these three weeks, the stand operated at a financial gain, netting $680.70 in explicit revenue (see Appendix A). Furthermore, operating the stand has provided James with valuable experiences that he could not receive in the class room, including time management, business operations, inventory control, and public relations. The experiences contribute to an implicit revenue that totaled $225 over the three weeks (see Appendix A). In evaluation of the operating costs, Pucker Up Lemonade Co, incurred $221.14 in explicit expenses over three weeks for cups, ice, lemonade mix, and equipment, and $601.75 in implicit expenses during the same time frame (see Appendix A). The implicit expenses were calculated solely by extending the time spent operating the stand by the current hourly minimum wage of $7.25. If Pucker Up decides to become a permanent vendor, the stand hours conflict with John’s
Image of page 2
ECONOMIC SUMMARY 3 prescheduled classes and the implicit expense of missing a semester of school needs to be considered. Overview of Business Health and Financial Performance Prior to completing an economic review of any business, it is first important to review the balance sheets and income statements to determine how the business is performing financially. Upon review of the income statements, it is clear that Pucker Up Lemonade Stand operated their stand in a fiscally responsible manner, with revenues far exceeding the expenses. Using the information from the income statement (See Appendix B), the partners can calculate their profit margin utilizing the formula noted in David Brownfield’s MBA Essentials (2007) Profit Margin = net income net sales , where earnings are the net income and revenues represent the net sales. This calculates ot profit margins for each season to be 65%, 67% and 70% repsectively.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern