The milkshake makers, tables and benches are assumed to last for 3 years. The refrigerator/freezer and counter tops are assumed to last for 10 years.

Mia is going to take out a loan of $4780. A self amo1tizing loan is assumed to be obtained from a bank, and carries an annual interest rate of 6% payable over 2 years with monthly payments (each monthly payment consists of both principal and interest).

**Employees:**

Two part-time employees: with each receiving a monthly salary of $800 per month (including taxes and benefits).

**REQUIREMENTS OF THE CASE**

Calculate the monthly fixed of running this milkshake stand.

Calculate the per unit variable cost.

Using the above information, determine the number of milkshakes you will need to sell to break even. In order to do this, you will need to classify the above costs into fixed or variable.

(Hint: keep all costs on monthly basis throughout your analysis).

Now consider that the owner will take fixed monthly salary of $1,000.

Calculate the new fixed cost per month of the company and detennine the amount of milkshakes you will need to sell to break even.

Mia has set her goal to sell 800 units in the first month of operation. Calculate the margin of safety of this business. Explain what you understand by margin of safety and interpret the result you ‘ve obtained.

Consider the following information. Construct two income statements using both variable costing and abso1ption costing.

Reconcile the NOI calculated under variable costing and absorption costing, for the month of May and June.

If units produced exceeds units sold, which method (variable costing/ absorption costing) would you expect to show the higher NOI? Why?