Salty Pawz Financial Information

Sales + Revenue

For the last six months, Wanda’s sales have broken down as shown below. She has also provided you with her cost for each variety of treat.

Products/Services % of Sales Sales Price COGS Contribution Profit Margin Weighted Profit Margin
Party Pooch 45% 20.00 10.40 9.60 48.00% 21.60%
Chicken Cuties 18% 15.00 7.80 7.20 48.00% 8.64%
Bison Bites 5% 21.00 10.80 10.20 48.57% 2.43%
Lamb Lovies 32% 24.00 12.60 11.40 47.50% 15.20%
(Must equal 100%) 100% Average profit margin 47.87%
Sales Price COGS
Chicken Cuties 1.25 0.65
Bison Bites 1.75 0.90
Lamb Lovies 2.00 1.05

Cost of Goods Sold

Wanda’s COGS include the packaging, labeling, the ingredients, and the time it takes to make the treats. Since she can bake them in big batches, her labor cost per unit is very low.

When Wanda ships her products, she charges just what it costs her. Shipping is done on a cost recovery basis and currently she doesn’t consider it in her income/expenses.

Monthly Expenses

Currently Wanda’s monthly expenses are:

Rent 0.00
Electricity 0.00
Telephone 100.00
Water/Sewer 0.00
Internet 60.00
Website 175.00
Salaries 0.00
Owner’s Draw 1000.00
Office Supplies 50.00
Loan Payment 0.00
Insurance 85.00
Other 0.00
Total Overhead $1,470.00

Sales Mix

Currently Wanda’s customers purchase her products at the following ratios:

Products/Services % of Sales
Party Pooch 45%
Chicken Cuties 18%
Bison Bites 5%
Lamb Lovies 32%
100%

Break Even Calculation

Based on her current monthly expenses and sales mix, this is what Wanda has to sell in order to break-even:

Products/Services Sales Price COGS Contribution Profit Margin Weighted Profit Margin
Party Pooch 45% 20.00 10.40 9.60 48.00% 21.60%
Chicken Cuties 18% 15.00 7.80 7.20 48.00% 8.64%
Bison Bites 5% 21.00 10.80 10.20 48.57% 2.43%
Lamb Lovies 32% 24.00 12.60 11.40 47.50% 15.20%
(Must equal 100%) 100% Average profit margin: 47.87%
Total Overhead $1,470.00
divided by Average Profit Margin 47.87%
= BREAKEVEN $3,070.91
Average Sales per customer is $20.00

BREAKEVEN Party Pooch Chicken Cuties Bison Bites Lamb Lovies
Monthly In Dollars $3,070.91 $1,381.91 $552.76 $153.55 $982.69
In Units 69 37 7 41

Forecasting Supply and Demand

Wanda is at capacity for production out of her kitchen, so she believes that she is at the maximum income she can generate with her current structure. If Wanda changes her pricing structure, the following quantities demanded and quantities supplied will result.

Chicken Cuties Chicken Cuties Chicken Cuties
Price ($) Demand (Q) Price($) Supply (Q) Price ($) Demand (Q) Supply (Q)
$0.75 1000 $0.75 500 $0.75 1000 500
$1.00 900 $1.00 650 $1.00 900 650
$1.25 800 $1.25 800 $1.25 800 800
$1.75 700 $1.50 1000 $1.50 700 1000
$2.00 600 $1.75 1400 $1.75 600 1400
$2.25 500 $2.00 1500 $2.00 500 1500
Bison Bites Bison Bites Bison Bites
Price ($) Demand (Q)   Price($) Supply (Q)   Price ($) Demand (Q) Supply (Q)
$1.00 1200 $1.00 500 $1.00 1200 500
$1.25 1100 $1.25 600 $1.25 1100 600
$1.50 900 $1.50 700 $1.50 900 700
$1.75 800 $1.75 900 $1.75 800 900
$2.00 700 $2.00 1000 $2.00 700 1000
$2.25 400 $2.25 1400 $2.25 400 1400
Lamb Lovies Lamb Lovies Lamb Lovies
Price ($) Demand (Q)   Price($) Supply (Q)   Price ($) Demand (Q) Supply (Q)
$1.75 1500 $1.75 800 $1.75 1500 800
$2.00 1400 $2.00 900 $2.00 1400 900
$2.25 1200 $2.25 1000 $2.25 1200 1000
$2.50 1000 $2.50 1200 $2.50 1000 1200
$2.75 800 $2.75 1400 $2.75 800 1400
$3.00 700 $3.00 1600 $3.00 700 1600
Party Pooch Party Pooch Party Pooch
Price ($) Demand (Q)   Price($) Supply (Q)   Price ($) Demand (Q) Supply (Q)
$16.00 1400 $16.00 600 $16.00 1400 600
$18.00 1200 $18.00 700 $18.00 1200 700
$20.00 1100 $20.00 800 $20.00 1100 800
$22.00 1000 $22.00 1000 $22.00 1000 1000
$24.00 900 $24.00 1200 $24.00 900 1200
$26.00 800 $26.00 1400 $26.00 800 1400

Income Information

Here is a summary of Wanda’s Salty Pawz income information for the past 6 months.

INCOME:
Party Pooch $                 40,500.00
Chicken Cuties $                 16,200.00
Bison Bites $                   4,515.00
Lamb Lovies $                 28,800.00
TOTAL INCOME: $                 90,015.00
COST OF GOODS SOLD:
Party Pooch $                 21,060.00
Chicken Cuties $                   8,424.00
Bison Bites $                   4,515.00
Canine Craving $                 15,120.00
Total cost of sales $                 49,119.00
GROSS PROFIT $                 40,896.00
OPERATING EXPENSES:
Rent $                            –
Electricity $                            –
Telephone $                      600.00
Water /Sewer $                            –
Internet $                      360.00
Website $                   1,050.00
Salaries $                            –
Owner’s Draw $                   6,000.00
Office Supplies $                      300.00
Loan Payment $                            –
Insurance $                      510.00
Other $                            –
TOTAL EXPENSES $                   8,820.00
NET INCOME
BEFORE TAXES $                 32,076.00

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