Case Study Cool Moose

Problem
Cool Moose was a success at the Tottenham store and the Alliston store in 2009. Perantinos considered whether will do full-time career of Cool Moose after graduate from university.
Potential solutions
1. Not change, continue operation
2. Purchase a used single-head soft-serve machine
3. Purchase a new triple-head soft-serve machine
4. Stop offer scooped ice cream
5. Purchase soft drinks machine
6. Offer ice cream cakes, the customer can order the birthday cake of special flavor
7. Offer real fruit smoothies, the customer can choose the one or two fruit to mix
8. Open the store in the whole year, take offer the ice cream and sell the hamburgers and hot dogs
9. Rent another store to open a restaurant, and the theme of the restaurant

c) Soft-serve will provide customers with more options.
d) Triple-head machine has a longer useful life of seven years.
e) Triple-head machine is more abundant, produce vanilla, chocolate and vanilla-chocolate swirl flavor.
f) The triple-head machine has persistent of seven year.
Cool Moose Creamery
Incremental Income Statement
New Triple Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Sales $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Cost of Goods Sold 1336 1336 1336 1336 1336 1336 1336
Gross Margin 8,664 8,664 8,664 8,664 8,664 8,664 8,664 Depreciation 285.71 1,714.29 1,714.29 1,714.29 1,714.29 1,714.29 1,714.29
Refrigerator Expense 150
Delivery expense 150
Installation Expense 650
Utilities 350 350 350 350 350 350 350
Wages 2,239.95 2,109.15 2,109.15 2,109.15 2,109.15 2,109.15 2,109.15
Interest Expense 594 662.5705 504.3456 334.6827 152.7547 8.241626 0
Opportunity Cost 2,415 2,415 2,415 2,415 2,415 2,415 2415
Total Expense 7,834.98 7,251.01 7,092.78 6,923.12 6,741.19 6,596.68 6,588.44
Net Income $829.02 $1,412.99 $1,571.22 $1,740.88 $1,922.81 $2,067.32 $2,075.56

Disadvantages:
a) Customers will reduce buy scooped ice

c) Cool Moose will have a higher opportunity cost than single-head machine.
Opportunity Cost If the company purchase Single-head If the company purchase Triple-head
Units of Scooped ice Cream 980 1,400
Units price $2.50 $2.50
Total sales $ 2,450.00 $3500.00
Cost percent of sale 31% 31%
Total costs $ 759.50 $1,085.00 Total opportunity cost $ 1,690.50 $ 2,415.00

d) Cool Moose will have higher labour cost than single-head machine in the 2010.
e) The Return on Investment (ROI) of the new triple-head is lower than used single-head in three year. Total Net Income Cost of Investment Return on Investment
New Triple-head $3,813.23 $12,000 32%

f) The payback period is longer than used single-head.
Cash Flow Statement
New Triple Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Net Income 829.02 1,412.99 1,571.22 1,740.88 1,922.81 2,067.32 2,075.56
Cost of Equipment 12,000
Depreciation 1,285.71 1,714.29 1,714.29 1,714.29 1,714.29 1,714.29