"creating" business exercises

1. The company that we have selected for our project is Rockstar Shrimp. Rockstar Shrimp is a Cajun seafood restaurant with slight Vietnamese influence.  Rockstar Shrimp produces many different products for its consumer but within our project, it will focus on its classic boiled shrimp covered in house sauce.  To manufacture a pound of shrimp, first, the shrimp is cooked and boiled It is then placed in a plastic bag containing the house sauce and a slice of lemon.  Once fully prepared, it is served to the customer.

2. Variable Costs (all costs are averages or estimates):

Rockstar Shrimp’s variable cost for shrimp include:

· Frozen Shrimp Price: $150 for 50 lb. (each pound of shrimp = one serving size)

· 150 / 50 = $3 variable cost per serving

· Rockstar Shrimp House Sauce: $50 for 100 servings

· 50 / 100 = $0.50 variable cost per serving

· Plastic bag: $23.50 for 1000

· 23.50 / 1000 = $0.02 cost per serving

· Lemons: $35 for 12 lb case (320 servings)

· 35 / 320 = $0.11 cost per serving

Rockstar Shrimp serves on average 50 lb of shrimp per day. This equates to a total sales revenue of $500 per day at a price of $10 for 1 lb of shrimp.

3. Fixed Costs (all costs are averages or estimates):

· Employee salaries: $9,600 per month

· Hours of operation is 320 hours per month.  Minimum wage is set at $10.  

· Average number of employees per hour is 3.  

· Rent: $2,000 per month

· Insurance: $900 per month

4.  Cost Breakdown:

5. Variable Costs: Frozen Shrimp, House Sauce, Plastic Bag, Lemons (3x + .5x + .02x + .11x)

x = Total lbs. of shrimp sold annually

Fixed Costs: Rent, Employee Salaries, and Insurance = $150,000 / year

Total Annual Costs = 3.63x + $150,000

6. Profit = Revenue - Costs:

Total Revenue (lbs. of shrimp sold x price per lb.): 19,948 x $10 = $199,480

Cost of Goods Sold (Variable + Fixed Costs): $212,437.24

Net Profit: $199,480 - $229,363 = - $29,883

7. From completing the first hands on assignment, we have obtained a full understanding of variable and fixed costs by implementing its principles in a practical manner.