1. For our project, we will be studying Lollicup. It is a popular chain cafe serving bubble tea and snacks in the University Village. It is a cafe that sells drinks with many different toppings like pudding, grass jelly, and boba. It also serves food like Popcorn chicken snack, sausage rice, and other entrees. The drinks come in two different sizes:small and large. For our product line, we will choose to analyze the Specialty Milk Teas. While these products are already popular, we can consider how to keep them popular and how to increase sales as well.
2.
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Manufacturing Variable Costs
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Items
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Price Per Item
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Popcorn Chicken Meat (lb)
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$1.45
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Rice (bag)
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$8.53
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Taiwanese Sausage (pack)
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$3.53
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Other Meat (lb)
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$3.86
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Tapioca Pearls(uncooked) (bag)
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$5.43
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Pudding/Grass Jelly Powder (bag)
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$13.00
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Flavoring Powder (Drinks) (bag)
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$12.65
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Flavoring Syrup (Drinks) (bottle)
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$6.53
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Cups (Small and Large)
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$18.95
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Utensils ( Forks, Chopsticks, Spoons in package)
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$14.95
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Manufacturing Variable Costs include all the ingredients that go into producing a Lollicup product. For the variety of items Lollicup sells, there are different ingredients and packaging involved. In the table above, we have listed all the things needed to produce products for sale.
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Non-Manufacturing Variable Costs
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Items
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Price
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Electricity/ Utility
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$650
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Cashier/Kitchen supplies
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$150
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Equipment Repair/Maintenance
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$400
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Advertise Printing
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$100
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Non-Manufacturing Variable Costs include things that are not directly associated with the final product in a visible manner. These are the items that may fluctuate, but will be present, when we are working to produce and sell the product.
3.
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Manufacturing Fixed Costs
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Items
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Price Per Unit
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Rent for location
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$4000
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Advertising
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$1500
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Equipment (i.e. blender, cups)
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$450
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Workers
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$8500
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The Manufacturing Fixed Costs for Lollicup include, rent for their location in the University Village, Advertising in pamphlets and signs around Riverside and at UCR, Equipment that is used to produce the food, and workers who will serve and produce the product.
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Non-Manufacturing Fixed Costs
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Items
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Price Per Unit
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Insurance (Workers Comp. & Liability)
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$1250
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General & Administrative
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$2000
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Maintenance
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$500
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Non-Manufacturing Fixed costs for Lollicup include the Insurance that is necessary when serving a large customer segment and having employees, General & Administrative tasks to make sure that managerial tasks are being accomplished, and maintenance to uphold the overall look and production of the store.
4. When evaluating the cost breakdown for Lollicup, we took into consideration the fact that Lollicup's menu has 65 items and acknowledged the various costs associated with their current items and the potential costs of items, if they chose to expand their menu. In addition, we considered any fluctuations in price or inventory due to summer and a lack of student presence and also influx in the fall for return of students.
Cost Breakdown
Month Number of Products Total Cost
January 65 $10000
February 65 $10000
March 65 $10000
April 65 $10000
May 65 $10000
June 70 $12000
July 70 $12000
August 75 $14000
September 75 $14000
October 75 $14000
November 75 $14000
December 75 $14500
5. Y=450X-19250
Total Cost=450*65-19250=10000
Variable cost = 14500-10000/75-65=450
Fixed cost= 10000-450*65=-19250
And fixed cost will never change
6. Lollicup sells approximately 65 items, not including the different sizes that the items come in. All the items at Lollicup are under $10 and can be broken down into the follow categories and price:
- Specialty Milk Tea $3
- Premium Tea $3
- Simply Fresh Drinks $3.50
- Signature Ice Blended $3.50
- Meal Combos $7
- Mini Bowls $5
- Tasty Snacks $5
- Dessert $4.25
Overall, we can estimate their Total Revenues to be approximately $500,000 and their Total Cost about $144,500, leaving potential $355,500 in profit.
7. It is very interesting to learn about an establishment that we have frequented and to learn about all the operations that go into making it function everyday. In addition, we learned a lot about cost breakdowns in terms of Variable Costs and Fixed Costs. Lollicup is a very interesting restaurant to study as it caters to a niche that is relatively large in Riverside; that niche being specialty drinks, more specifically boba drinks. We are excited to dig deeper into this establishment and learn exactly how it works.
Attachment:- hands_on_assignment_2_0.zip