Jill Narremk is just about to take over the operation of a small coffee shop on March 1. The current owner of the shop will sell Jill the furniture and equipment currently there for $15,000 and $20,000, respectively. The furniture and equipment have no residual value and will be used for five more years. Jill and two assistants will be the only employees working at the shop. The shop will be open 26 days per month for 10 hours per day. Jill believes that she will serve about 300 customers each day with an average sale of $4 each in March but she thinks that the number of customers will increase by 5% per month because of her friendly approach when dealing with customers. Half of the customers are expected to pay with debit cards and the bank charges her $0.20 for each debit card transaction. Her assistants will be paid $15 per hour for 8 hours per day each and she hopes to be paid a $5,000 salary each month. Jill is assuming the lease for the premises from the current owner, who is paying $6,000 rent per month. This also includes rent for the debit card equipment. She estimates her monthly utilities at $1,200, monthly supplies at $500, and her food and coffee costs to be one-third of her sales. She will order inventory almost daily and pay for it immediately. Jill is going to pay the $35,000 for the furniture and equipment using a $40,000 loan from her father. The extra $5,000 she has received from him will be used to buy inventory and supplies. He is wondering if she can start paying him back at the end of April. He would like her to give him $1,500 per month.
Instructions
(a) Prepare a for March and April.
(b) Based on your budget, determine if Jill can pay her father the $1,500 per month that he wants.
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