1. Compute the company's contribution margin in total dollars and per unit dollars under the 3 scenarios • Currently• Alternative 1: Bakery• Alternative 2: Drive-thru2.) Compute the company's contribution margin ratio under the3 scenarios. (Note: DO NOT ROUND the CMR % for accurate calculations in the following questions) You may find it easier to use formulas in excel as it will use the entire figure in the formula calculation. 3) Compute the break-even point in units under the 3 scenarios 4.Compute the break-even point in sales dollars under the 3 scenarios 5.) Compute the Profit Margin and Return on Assets under the3 scenarios. Assume current average assets are $250,000.Average current assets for Alternative 1: Bakery would be $300,000, and Alternative 2: Drive-thru would be $400,000.6.Compute the Degree of Operating Leverage for Alternative1: Bakery and Alternative 2: Drive-Thru 7) Assume that the company expects customer sales to decline by 20% next year. There will be no change in sales prices. Compute the net income for each of the three scenarios (assume a 30% tax rate). 8.) Assume that the company expects customer sales to increase by 20% next year. There will be no change in sales prices. Compute the net income for each of the three scenarios (assume a 30% tax rate). 9.) Compute the sales units required if the company wishes to generate a Target Income Before Taxes of $100,000 for all 3 scenarios. 10. What would the net income be under Alternative 1-Bakery and Alternative 2-Drive-Thru if CCC was unable to increase sales in units (sales units remain the same as last year)? 11. The company can only pick one of the alternatives (Either Bakery or Drive-Thru), due to the time and resources involved. Analyze and compare your calculations above for alternative 1 and alternative 2, which alternative do you recommend to Nathan and Cody? Explain which alternative you recommend and why. You will need to state 2 qualitative reasons and 3 quantitative (financial) reasons. Best friends, Nathan and Cody, decided to start their ownbusiness which would bring great coffee from all over the worldto their local community. Together they formed Classic CoffeeCompany, or CCC (assume their coffee shop is located a fewmiles from our college campus). Nathan is selecting andmaking the coffee they serve. Cody manages the front andback office; selling coffee to customers, paying employees, andrunning ads for the coffee shop.Last year, the company sold 50,000 units and had the belowsales and cost figures.SalesVariable CostsContribution Margin$150,000.00$ 45,000.00$ 105,000.00$50,000.00Fixed CostsIncome Before Taxes $ 55,000.00Income Tax$ 16,500.00Net Income$ 38,500.00The team have been in business for two years. Withcompetition rising in the coffee industry, they know that anotherchallenging and competitive year lies ahead of them. They areconsidering two alternatives and have hired you as theirbusiness consultant to help them make this important businessdecision.Classic Coffee Company Alternative 1- BakeryFacing stiff competition from other coffee and beverageshops, Classic Coffee Company (CCC) is consideringexpanding its products to include bakery items. They would notmake the food items themselves, but have items delivered fromoutside vendors. CCC would now experience higher averagesales amounts per customer since beverage sales may beaccompanied with food sales. This would, however, increasethe company's variable costs since it would need to purchasethe food items from outside vendors. The following datapertains to adding the bakery option:• Total sales in the number of units would increase 25%with the added bakery option.• The average sales price per unit would increase from thecurrent $3.00 to $5.00 when food sales are added to thecoffee shop.• The variable cost per unit would increase to $2.50 perunit to account for the added cost of bakery items.• There would be an increase in fixed costs of $25,000 foradvertising to inform the public of this change.Alternative 2 - Drive ThruCCC is thinking about having a drive-thru installed. Havingthis amenity would help the coffee shop increase its customerbase, allowing them to reach a greater number of customers.This added convenience would permit CCC to slightly increasethe price of its average coffee and would not increase the perunit variable costs for the company. The following data pertainsto adding the drive-thru option:• This alternative is exclusive of alternative 1• Total sales in the number of units would increase by130% from last year.• The construction of the drive-thru would increase fixedcosts by $130,000 - which represents one-timeconstruction and installation costs.• This alternative would allow CCC to increase theiraverage sales price to $3.20 a cup of coffee and theirvariable cost per unit would remain the same at $0.90per unit.

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