The food truck’s signature dish was its “Ripped Pig” pulled pork sandwich.4 The

Question

The food truck’s signature dish was its “Ripped Pig” pulled pork sandwich.4 The sandwich came in a combo with coleslaw, baked beans, and French fries and was priced at $12. The company had variable costs, which included the cost of the food, clamshell packaging, and variable overhead. Variable costs were 40% of the company’s revenues. There was no labor cost as neither Joe nor Cat drew a wage or salary. Fixed costs included items such as gas for the generator, maintenance, business licenses, and truck depreciation. These costs totaled $10,000 per year. The operational year for the food truck was 180 days. On a typical day, Cat and Joe served between 75 and 125 patrons, with an average of 100.  Joe also had a formula for when the truck was invited to special events: He expected 35% of attendees would purchase food, not necessarily from him, but from one of the food vendors at the event. He would use this ratio to estimate the number of potential customers. He would then divide his estimate for potential customers by the number of vendors serving the event. If he was the only vendor, he would get all of the potential customers, if there were two vendors, he expected to get 50% of the food-buying customers. This number would serve as his guideline for how many pounds of meat he would need to smoke the night before. It had proven to be accurate in the past, and Joe intended to use this formula for any special events going in the future.

The Bullarama Event

s. According to event organizers, 700 tickets had been sold. When Joe and Cat brought their truck to special events they did not serve their usual pulled pork sandwich combo. They served only the sandwich, with no beans, coleslaw, or French fries. This enabled them to serve customers much more quickly and to reduce their price to $9 per serving. It also let them replace their expensive clamshell packaging with a much cheaper foil wrapping. With fewer side dishes and less expensive packaging, variable costs would be reduced by $1.90 per customer when compared to their normal menu. There were several other cost considerations related to the Bullarama event. First, the event organizers suggested a donation of $100.6 Second, their food truck ran on propane, and the 140 kilometer round trip to Barriere would add $100 to their typical fuel costs. Finally, in order to maximize space for the mobile cooking equipment, the truck only had one seat (for the driver), so if Joe drove the food truck, Cat would need to drive her car separately, with an expected extra gas cost of $30.

Prepare a contribution-format income statement for the Bullarama event based on an optimistic projection (no onsite competitors), a conservative projection (one onsite competitor), and a pessimistic projection (two onsite competitors).

Explanation / Answer

Event-optimistic conservative pessimistic potential customer(700*.35) 245.00 122.50 81.67 Sale price 9.00 9.00 9.00 Variable cost (4.8-1.9) 2.90 2.90 2.90 contribution margin 6.10 6.10 6.10 total contribution 1494.50 747.25 498.17 Expenses Donation 100.00 100.00 100.00 Fuel cost 100.00 100.00 100.00 extra gas 30.00 30.00 30.00 total expenses 230.00 230.00 230.00 Net Profit 1264.50 517.25 268.17

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