Reference no: EM133435864

Case Study: Due to a downturn in the American economy, Burnaby Butter's US cheese sales have dipped 30% from its peak average of $34,000 monthly (achieved over a 4-month stretch last year). The company typically earns a gross margin of 41% on American sales.

Local grocers have also felt an economic pinch recently and have pushed for lower prices (sales volume has only dropped 5% to date). At peak volume, sales are $102,000 monthly. Typically, the gross margin on sales to large local grocers is 37%.

Problem:

The fixed costs of the cheese department currently total $570,000 annually. Fred notes that one of the major factories also produces whipped butter. Based on square footage (used for allocating fixed costs), 37% of the factory is used for whipped butter manufacturing. As the shared fixed costs for the factory total $19,000 per month and whipped butter generated an average monthly gross margin of $6,400 over the past three months, Fred is wondering if closing the whipped butter department is a good idea. In addition to insight and recommendations on the overall financial performance of the cheese department, Fred wants a recommendation on closing the whipped butter department, with all relevant factors discussed in detail.

Fred is aware that there is a risk with selling primarily to large grocery store chains, but he wants more insight on the matter. He is looking for new local grocers who will be willing to pay more for the cheese products. The ideal customer might be a smaller mom and pop shops who sell premium cheeses at higher prices. Fred believes it may be possible to establish partnerships with five small stores, with $25,000 in annual sales on average. He believes it is possible to make a 55% margin on specialty cheeses sold in this manner.

Question: With this information, identify what financial statement to make? when you have identified it, make that balance in an excel table