Cat & Joe’s Pig Rig

...

$600.00

Contribution Margin

$540.00

$720.00

$900.00

Less Fixed Cost

$56.00

$56.00

$56.00

Before Tax Profit

$484.00

$664.00

$844.00

Less Income Tax(20%)

$96.80

$132.80

$168.80

After Tax Profit

$387.20

$531.20

$675.20

Financial Analysis and Non-Financial Analysis: Bullarama Event

Based on Joe’s experience, he estimated 35% of the attendees would buy food in the event. Therefore, I assume in the optimistic scenario, there will be 245(700*0.35) sandwich combo sales, 122(245/2) in conservative scenario, and 81(245/3) in pessimistic scenario, respectively. In the event, they usually change the menu from the combo to sandwiches only which makes the price adjusting from $12 to $9 per unit. Due to the menu change, the different packaging makes the variable cost from $3.6 to $1.7. ($9*40%-$1.9) However, the fixed cost goes up with the suggested donation fee, commuting fuel cost, and extra gas cost of Cat. There are more $230 on the fixed cost if they decide to attend the event. Financially, they will still make profit based on the three different scenario analysis provided as below:

Cat & Joe Contribution Margin Income Statement for a Daily Sales in Bullarama

Customers

245(Optimistic)

122(Conservative)

81(Pessimistic)

Sales($9)

$2,205.00

$1,098.00

$729.00

Less Variable Cost ($1.7)

$416.50

$207.40

$137.70

Contribution Margin

$1,788.50

$890.60

$591.30

Less Fixed Cost

$56.00

$56.00

$56.00

donation

$100.00

$100.00

$100.00

fuel cost

$100.00

$100.00

$100.00

extra gas cost

$30.00

$30.00

$30.00

Before Tax Profit

$1,502.50

$604.60

$305.30

Less Income Tax(20%)

$300.50

$120.92

$61.06

After Tax Profit

$1,202.00

$483.68

$244.24

There are three main non-financial advantages listed as below:

First, this event is a good opportunity to promote their southern style BBQ to new customers. Those customers could be the potential customers in the future because they can track Cat & Joe from the social media and meet them in the south.

Second, due to the potential one or two vendors could attend the event. They may have chance to exchange some entrepreneur experience and have more clear picture in this industry.

Third, the event could be a market test to Cat & Joe with their southern style BBQ. If it succeeds, Cat & Joe will feel more confident to attend the event in the north in the future.

However, there are also some non-financial disadvantages. For example, Joe will have extra work load such as driving the total 140 km round trip himself. It could negatively affect his physical condition to serve customers and working quality the next day. Also, the weather is unpredictable before they decide to attend the event. If it is rainy, they will potentially have lower attendees and have different results.

Recommendation

Assume there is one onsite competitor in the event:

Financially and conservatively, they can make $483.38 after-tax profit which may be lower than the daily profit in Kamloops. However, they can expand different customer base and promote their different style BBQ in new market. The daily sales discrepancy can be regarded as marketing budget as they barely try different marketing approach instead of social media. Also, it’s a very good opportunity to test their product whether to be welcomed in the new market. It will benefit to their career plan if they decide to have branches in the north or even chain stores in the future. Therefore, I recommend them to attend this event because all the feedback from the different market will benefit to them in the long-term development.