Six months have gone by and Frank is doing pretty wellhe thi

Six months have gone by and Frank is doing pretty well....he thinks...but when he is asked if he is making any money, he has to stop and consider, \"Am I\"? We are going to make some assumptions and help him determine whether or not there is a profit.  

I have started the discussion with some assumptions about how Frank has done from a sales and cost perspective.
Then all of you will brainstorm together with focus on answering \"Did Frank turn a profit after the first six months of business?\"

Hint: Consider what costs are to be taken into account in relation to these sales.

Once the framework of revenues/expenses is established, explore how to track this performance on an ongoing basis.

Use this information

            I plan to start a hotdog cart vending business in the Holtville Business Complex (HBC) down town Tennessee. I look forward to target the human traffic which frequents the area between the hours of 11:00am to 3:00pm from Monday to Saturday every week. A feasibility study which I conducted in the area reveals an inadequacy of hot dog vendors and restaurants. Currently there are only two hot dog cart vendors and three restaurants; as a result the huge working populations are under serviced. Most of these people have to work really walk or drive long distances in order for them to get a bite during their lunch hour or grab a late afternoon snack. What with the long queues behind the two hot dog car vendors and the overcrowded restaurants to serve the burgeoning business people and ‘hot dog hungry’ students of Tennessee University. I have resolved to be the third vendor, and I will position myself strategically in the complex having the knowledge that the weekday population of the Holtville Complex is 4500 people, excluding Saturdays of which I will also be operating.

            Recent estimates from the American Hot Dog Council indicate that Americans consume 20 Billion hot dogs every year. Actually, 95% of the US household enjoys them. Relative to the entire American Population, that translates to 70 hotdogs per person per year, and approximately 15% of this is purchased from the vendor’s carts. Considering these figures and retail price of $4.50 per serving and a side order and beverage accompaniment, the annual sales potential in the Holtville Business Complex are is $245,500. Based on all these facts, it will be very strategic to operate in this are as vendor cart and to tap in into the pot entail sales as outlined in the above figures.

The business will be registered as Frank’s Dogs Vending Co.”To set up the business I require a 2 year loan of $9,500 in addition to my own investment of $4,500 to cater for the purchase of the cart and start up supplies.

Frank’s Dogs Vending Co Income Statement

Four Months             Eight Months             Twelve Mon

Ended Dec 31,           Ended Dec 31,           Ended Dec31,

2015                            2015                            2015

Revenue                                 $13,844                       $17,973                       $21,321

Direct Cost                             $5,948                         $7,744                         $9,198

Gross Profit                             $7,895                         $10,228                       $12,123

Gross Profit %                      57%                            57%                            57%

Operating Expenses

Salary                                      $0                                $0                                $0

Business Licenses and Permits$500                           $500                            $500

Supplies                                   $2400             $2400                          $2400

Equipment                               $600                            $0                                $0

Utilities                                   $330                            $330                            $330

Repairs and Maintenance        $600                            $600                            $600

Advertising and Promotion    $690                            $890                            $1060

Expensed Portion of Other

Current Assets                        $0                                $0                                $0

Depreciation and Amortization $140                         $140                            $140

Total Operating Expenses    $                                  $                                  $

Operating Income                 $442                           $647                            $749

Other Expenses (& Other Income)

Loss (or Gain) on Sale of Asset $0                             $0                                $0

Interest Expense                     $230                            $160                            $660

Total Other Expenses

(& Other Income)                                                                 

Income Before Income Tax $3350                          $5600                          $7430

Income Taxes                          $310                            $520                            $690

Net Income                             $3040                          $5080                          $6740

Net Income / Sales                 22%                            28%                            32%

Balance Sheets

Assets (expand the list to include all assets)

Dec 31,2015

Current assets:

Cash and cash equivalents

$    33,723

Accounts receivable

            25,204

Inventories

              0

Other Current assets

              0

Total current assets

            58,927

Long Term Assets

              116,000

72,000

Accumulated Depreciation

Total Long term Assets

44,000

Total Assets

$102,927

Liabilities and stockholders\' equity (Not needed for Part 1)

Current liabilities:

Accounts payable

3,557

Sales Taxable payable

0

Short Term Debt

0

Total current liabilities

3,557

Long-term debt

1,513

Total liabilities

5,070

Paid in capital

63,000

Retained Earnings

(45,600)

Profit and Loss Current period

14,860

    Total stockholders\' equity

32,260

Total liabilities and stockholders\' equity

37,330

Assets (expand the list to include all assets)	Dec 31,2015
Current assets:
Cash and cash equivalents	$    33,723
Accounts receivable	25,204
Inventories	0
Other Current assets	0
Total current assets	58,927
Long Term Assets	116,000 72,000
Accumulated Depreciation Total Long term Assets	44,000
Total Assets	$102,927
Liabilities and stockholders\' equity (Not needed for Part 1)
Current liabilities:
Accounts payable	3,557
Sales Taxable payable	0
Short Term Debt	0
Total current liabilities	3,557
Long-term debt	1,513
Total liabilities	5,070
Paid in capital	63,000
Retained Earnings	(45,600)
Profit and Loss Current period	14,860
Total stockholders\' equity	32,260
Total liabilities and stockholders\' equity	37,330

Solution

Getting profit is the indicator of making money. Net income in the income statement shows profit. Since the net incomes are positive “F” earns profit and makes money.

F’s total amount of profit and money during the year is as under:

Four month’s net income

$3,040

Add: Eight month’s net income

$5,080

Add: Twelve month’s net income

$6,740

Total amount

$14,860

This amount could be cross tallied with the amount “profit and loss current period” in the balance sheet. Both are exactly tallying. Therefore, F makes money amounting to $14,860 during the year.

Four month’s net income	$3,040
Add: Eight month’s net income	$5,080
Add: Twelve month’s net income	$6,740
Total amount	$14,860