Question

Develop a snack bar for a local high school football stadium. You have an empty shell of a small room (measuring ten feet by 15 feet). You currently have no cooking instruments, but you have an ice maker and cash register that you do not need to pay for. Your task is to buy equipment, based on what you want to sell, and then you have to buy products to sell. You need to look at actual prices (you can buy some food at Costco as an example). You have to develop a budget that takes into consideration fixed costs and variable costs and then the revenue you anticipate making. I want this to be as real world as possible so you have to think about whether your budget is realistic and if you have covered everything. Imagine if you work at the high school and if screw-up you can be fired. You want to maximize revenue, but minimize costs. The key is to think about what you will offer, how you will offer it, how will you deliver, produce, etc… everything before you start buying. As an example, you need to clean the snack bar after every game which requires you buy cleaning supplies. Another component is identifying what are fixed costs and what are variable costs.

Answer 1

Devoloping a Business Plan: -

A written plan is needed to execute anything in life and strictly following the plan will result in achieving what the target is. A plan doesn't doesn't mean it will not change and things wll run smoothly as per the plan. Many a times a plan need to revised as per the changing circumstances. A manager who who doesn't change with time is a lousy manager and that organisation will be thrown out of the market.

Be like a water so that we can take any form or shape effortlessly.

While making budget we need to first set profit margin and target revenue.

Estimated Cost = Target Revenue - Profit Margin.

Where,

Setting Profit margin signifies we are targeting atleast that amount of income from business.

Target Revenue means we have studied the market and will be able to generate revenue of that kind.

Estimated Cost is the difefrence between Target Revenue and Profit Margin.

Estimated cost will be variable here as if estimated cost comes more we will try to reduce the estimated cost by reducing the activity in the products which doesn't add value to the product and also doesn't reduce quality of the product after removing it.

In the given case, this specific industry usually have a profit margin of 20%. Therefore, we are setting the same 20 %. We have a target of revenue in a year would be $10000 after studying the market, considering we are new in the market and also after considering slow down in the economy due to Covid 19.

Therefore, Estimated Cost = $10000 - 20% of $10000

= $8000.

Now, we have to have a  cost under  $8000.

Things to need to buy under $8000.

-Equipment - It is an investment for an organisation and depreciation can be claimed on it.   

Fixed Cost: - Salary, Cleanig expenses, Rent, Electricity,

Variable Cost: - Raw material cost, Sales promotion cost included online advertisng etc.

Hence, If we need to earn $2000 i.e 20% margin then our cost should be under $8000 after considering above items. If cost exceeds the $8000 then we have to do cost cutting of non value added item or increasing revenue by targeting more customers.