Question

At Cleveland Hopkins International Airport in northeastern Ohio, a vending machine that dispenses socks was recently installed. Located in the C concourse, the Stance sock vending machine offers a variety of what Stance refers to as “uncommon” socks. The designs on the socks in the Cleveland airport vending machine include Cleveland Browns, Cleveland Indians, patriotic flag designs, Hawaiian tropical flowers, and others.

The machine is stocked with an assortment of socks. The airport traveler inserts a credit card, makes a sock selection in the keypad, and the socks are dispensed to the purchaser.

Stance sells its socks through retailers, at its own stores, via vending machines, and through monthly subscriptions.

Requirements:

You are the CFO of Stance Inc. write a memo to the CEO. The form of the memo should include a brief statement of the facts. An analysis of the situation covering the items listed below, a recommendation.

1) the types of costs incurred with the airport vending machines. Assume that Stance rents the vending machine from a vending service. Use your imagination and list as many costs as you can.

Use the chart below to list the types of costs you think the company has.

Cost	Variable	Fixed	Mixed
e.g. socks	X

2) the impact of the current cost structure on the breakeven volume analysis for the airport machines.

3) the impact on the breakeven analysis if the company were to purchase the vending machines.

Answer 1

Answer:

The costs of Stance are often fixed as the expense of the vending machine, purchase, leasing, etc. are fixed. These prices will be set, no matter what the revenue. Since the rate is set, a certain number of socks would have to be sold for breakeven. Let's say the fixed cost is $1,000 and the price of one sock is $10. The minimum amount to be sold is 1000/10 = 100 socks.
Note: Certain costs are variable, but in this situation, the cost would be small. Costs linked to the vending machine.

Rent- direct
Cogs- direct
Salaries-direct
Maintenance and service- direct
Transport- Indirect
Insurance- Indirect
Salary- Indirect
Tax- Indirect
Administrative – indirect
Depreciation-Indirect
As the business switches from the convenience store to the total sock line of products plan, the pricing structure would change entirely. It's going to look such as this:

Fixed costs: operating overhead, overhead production, direct labor
Variable costs: direct products, fees, suppliers of output


*Please vote positively if you like the solution and also comment which part seems difficult.