Reference no: EM13983270

1. For our project, we will be studying Lollicup. It is a popular chain cafe serving bubble tea and snacks in the University Village. It is a cafe that sells drinks with many different toppings like pudding, grass jelly, and boba. It also serves food like Popcorn chicken snack, sausage rice, and other entrees. The drinks come in two different sizes:small and large. For our product line, we will choose to analyze the Specialty Milk Teas. While these products are already popular, we can consider how to keep them popular and how to increase sales as well.

2.

Manufacturing Variable Costs
Items		Price Per Item
Popcorn Chicken Meat (lb)		$1.45
Rice (bag)		$8.53
Taiwanese Sausage (pack)		$3.53
Other Meat (lb)		$3.86
Tapioca Pearls(uncooked) (bag)		$5.43
Pudding/Grass Jelly Powder (bag)		$13.00
Flavoring Powder (Drinks) (bag)		$12.65
Flavoring Syrup (Drinks) (bottle)		$6.53
Cups (Small and Large)		$18.95
Utensils ( Forks, Chopsticks, Spoons in package)		$14.95

Manufacturing Variable Costs include all the ingredients that go into producing a Lollicup product. For the variety of items Lollicup sells, there are different ingredients and packaging involved. In the table above, we have listed all the things needed to produce products for sale.

Non-Manufacturing Variable Costs
Items		Price
Electricity/ Utility		$650
Cashier/Kitchen supplies		$150
Equipment Repair/Maintenance		$400
Advertise Printing		$100

Non-Manufacturing Variable Costs include things that are not directly associated with the final product in a visible manner. These are the items that may fluctuate, but will be present, when we are working to produce and sell the product.

3.

Manufacturing Fixed Costs
Items		Price Per Unit
Rent for location		$4000
Advertising		$1500
Equipment (i.e. blender, cups)		$450
Workers		$8500

The Manufacturing Fixed Costs for Lollicup include, rent for their location in the University Village, Advertising in pamphlets and signs around Riverside and at UCR, Equipment that is used to produce the food, and workers who will serve and produce the product.

Non-Manufacturing Fixed Costs
Items		Price Per Unit
Insurance (Workers Comp. & Liability)		$1250
General & Administrative		$2000
Maintenance		$500

Non-Manufacturing Fixed costs for Lollicup include the Insurance that is necessary when serving a large customer segment and having employees, General & Administrative tasks to make sure that managerial tasks are being accomplished, and maintenance to uphold the overall look and production of the store.

4. When evaluating the cost breakdown for Lollicup, we took into consideration the fact that Lollicup's menu has 65 items and acknowledged the various costs associated with their current items and the potential costs of items, if they chose to expand their menu. In addition, we considered any fluctuations in price or inventory due to summer and a lack of student presence and also influx in the fall for return of students.

Cost Breakdown

Month                  Number of Products       Total Cost

January                       65                         $10000

February                      65                         $10000

March                          65                         $10000

April                            65                         $10000

May                             65                         $10000

June                            70                         $12000

July                             70                          $12000

August                         75                          $14000

September                   75                          $14000

October                        75                          $14000

November                     75                          $14000

December                     75                          $14500

 

5. Y=450X-19250

Total Cost=450*65-19250=10000

Variable cost = 14500-10000/75-65=450

Fixed cost= 10000-450*65=-19250

And fixed cost will never change

6. Lollicup sells approximately 65 items, not including the different sizes that the items come in. All the items at Lollicup are under $10 and can be broken down into the follow categories and price:

• Specialty Milk Tea $3
• Premium Tea $3
• Simply Fresh Drinks $3.50
• Signature Ice Blended $3.50
• Meal Combos $7
• Mini Bowls $5
• Tasty Snacks $5
• Dessert $4.25

Overall, we can estimate their Total Revenues to be approximately $500,000 and their Total Cost about $144,500, leaving potential $355,500 in profit.

7. It is very interesting to learn about an establishment that we have frequented and to learn about all the operations that go into making it function everyday. In addition, we learned a lot about cost breakdowns in terms of Variable Costs and Fixed Costs. Lollicup is a very interesting restaurant to study as it caters to a niche that is relatively large in Riverside; that niche being specialty drinks, more specifically boba drinks. We are excited to dig deeper into this establishment and learn exactly how it works.

Attachment:- hands_on_assignment_2_0.zip