Economic Analysis

    Nox Box, LLC started in Fall 2021 as a not-for-profit. They make and sell all natural dog treats. Their mission, beyond providing a healthy and tasty treat for the goodest boys and girls, is to help out other animals in need. Every dollar of sale is matched at 2:1 (i.e. $1 of sale is matched with $2, for each sale netting $3 for the charity) with all proceeds being split between two animal shelters chosen by the owners. With the company being a non-profit organization, every penny saved results in more money for the benefit organizations. They make two types of dog treats, a sweet potato and pumpkin (PP) and a peanut butter (PB) treat. The treats all sell for 2 for $1. As a non-profit Nox Box needs all the help it can get to effectively run the charity, so they have asked you for assistance in projecting out the costs moving forward so they can understand what to expect in the upcoming years and plan for expansion of their operations. They have provided you with the following information: Recipes: Sweet Potato and Pumpkin Peanut Butter per 35 Per 24 Sweet Potato 32.48 oz Coconut Flour 11 oz Pumpkin Puree 18.08 oz Eggs 1.75 oz Coconut Flour 8.8 oz Peanut Butter 8.46 oz Eggs 5.25 oz Water 8.35 oz Molasses 5.94 oz Honey 1.48 oz Average prices for ingredients are as follows: Average Price Sweet Potato 0.1 oz Pumpkin Puree 0.81 oz Coconut Flour 0.17 oz Eggs 0.09 oz Molasses 0.27 oz Peanut Butter 0.2 oz Water 0.013 oz Honey 0.52 oz Not sure of their success/failure of the non-profit the owners have decided to run a test market. They determine that revenues of $300 are a good goal for their 1st attempt. Further they expect that due to the time of year the PP treat will be more appealing and expect a 60/40 between the two types of treats. In addition to the ingredients required to make the treats the processes need additional support via Administration, Marketing, and Cleaning. While all the costs are ultimately absorbed by the firm, the owners would still like to know the full cost of production for possible scaling in the future. These costs are as follows: Administration Marketing Cleaning PP PB Total Costs 300 20 26 ? ? # Emp 3 1 1 2 2 Designs 0 0 0 1 1 Sq Ft 900 450 450 1200 1000 1) To understand a true cost break-down please provide the expected full costs of the treats (both PP and PB) for the expected level of sales and include a distribution of service costs following the Step-Down Method where Admin is 1st, Cleaning is 2nd, and Marketing is 3rd applied. During production the team came across the following costs for goods purchased: Total Oz Total Price Sweet Potato 160 18.2 Pumpkin Puree 87 8.45 Coconut Flour 64 21.86 Eggs 21 4.12 Molasses 24 6.42 Peanut Butter 80 12 Water 88 0.52 Honey 16 7.02 After baking the team had the following information for materials used: PP PB Produced 98.00 87.00 Sweet Potato 96.56 - Pumpkin Puree 50.72 - Coconut Flour 20.30 29.52 Eggs 14.55 12.60 Molasses 16.50 - Peanut Butter - 70.94 Water - 68.44 Honey - 10.26 2) The sales team was able to sell: 88 of PP 86 of PB Using the preceding data the team would like you to preform the post service analysis. The team would like you to provide a full variance analysis of the two product lines on both a revenue and cost perspective. • For this you should have variances at all levels, so the basic variances (static budget, flexible budget, sales volume) and the advanced variances you are able (sales mix, price, efficiency, mix, and yield for all relevant pieces) After please provide a brief analysis of the variances (i.e. which are the most important) and some insight into what the firm can do moving forward.