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In early 2010, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry's Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. They began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2010 and were estimated at $1.2 million in 2011.
Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Other expenses, including taxes, averaged an additional $1 per cup of frozen yogurt in 2010 and were estimated at $1.20 per cup in 2011.
A. Determine the number of cups of frozen yogurt sold each year.
B. Estimate the dollar amounts of gross profit and net profit for Jen and Larry's venture in 2010 and 2011.
C. Calculate the gross profit margins and net profit margins in 2010 and 2011.
D. Briefly describe what has occurred between the two years.
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