Question

A student organization has been given permission to operate a burrito stand during the upcoming homecoming weekend. The stand will be located just outside the football stadium, making it accessible during the ball game. The location is also convenient for visitors as they tour the campus at other times during the weekend. An estimated 5,500 visitors will be on campus, in addition to the campus population of 2,500.

Each burrito requires:

1 - tortilla

2 oz. meat

6 oz. Rice

8 oz. beans

2 oz. cheese

2 oz. salsa

Tortillas cost $4.00 per 20 count bag; meat cost $3.00 per lb, rice cost $12 for a 25 lb bag; Refried beans cost $3.60 for a 64 oz can.; cheese costs $15.00 per 5-lb. package; salsa costs $2.40 for 40 oz. jar. Club members will make the burritos and staff the stand on a volunteer basis. The university requires each vendor to pay a $25.00 permit fee. You also need to purchase a canopy for $150, a small grill for $250, and other supplies for $100. Your club plans to donate the profits from the burrito sales to a local children’s hospital.

1)Anticipate selling each burrito for $6.00. Create and show a properly formatted basic Income Statement/P & L. What is your net profit margin as a percentage?

2)Calculate your Break- Even point based on your expenses required for the event? Be sure to write the formula and show your calculations

Answer 1

a. Assuming the sales will be 8000 burittos, income statement is prepared below:

Income Statement for Buritto Business

Income		$	$
	Sale of Burrittos
	(8000 * $6)		48000
	Cost of Goods Sold
	Purchases ( Working Note - 1)	13600	13600
	Gross Profit		34400
Expenses
	Permit Fee	25
	Purchase - Canopy	150
	Purchase - Grill	250
	Other Supplies	100
			525
	Net Profit		33875

Net profit Margin in % = 33875/48000 *100 = 71%

Working Notes

Purchases

1. Tortilla

Required qty = 8000 Nos

Purchase Price = $ 4 per 20 count bag

Therefore Total Cost = 8000/20 * 4$ = 1600 $

2. Meat

Required Qty for 8000 Burritos = 8000 * 2 = 16,000 oz

Purchase Price = $3.00 per lb

Therfore total cost for 16,000 oz ie 1000 lb ( 1 lb = 16 oz)

= 1000 * $ 3 = 3000 $

3. Rice

Required Qty for 8000 Burritos = 8000 * 6 = 48,000 oz

Purchase Price = $12.00 per 25 lb bag

Therfore total cost for 48,000 oz ie 3000 lb ( 1 lb = 16 oz)

= 3000/25 * $ 12 = 1440 $

4. Beans

Required Qty for 8000 Burritos = 8000 * 6 = 64,000 oz

Purchase Price = $3.60 per 64 oz can

Therfore total cost for 64,000 = 64000/64 * $ 3.6 = 3600 $

5. Cheese

Required Qty for 8000 Burritos = 8000 * 2 = 16,000 oz

Purchase Price = $15.00 per 5 lb pack

Therfore total cost for 16,000 oz ie 1000 lb ( 1 lb = 16 oz)

= 1000/5 * $ 15 = 3000 $

6. Salsa

Required Qty for 8000 Burritos = 8000 * 2 =16,000 oz

Purchase Price = $2.40 per 40 oz can

Therfore total cost for 16,000 = 16000/40 * $ 2.4 = 960 $

Total Purchases = 13600

2. Break Even Point = Total Expenses/Sale price per buritto

= 2354 Burritos , Considred the expenses for purchases is taken as fixed irrespective of number of sales.