Coco Mix Essay

1806 Words Sep 19th, 2014 8 Pages
oohCocoMix Juices© Mini-case
Copyright © 2012 by Dr. Gabriel G. Ramírez

FIN 4220
Bebidas-Sabrosas (B-S) Inc. is a producer and distributor of juice drinks. Currently, B-S has one line of tropical juices targeted to Hispanic communities in Chicago, LA, Miami, and New York. Two years ago, the firm decided to expand its operations and create a juice drink from Costa Rican green coconuts, or “pipas” (see Exhibit 1). The liquid inside pipas is clear, as opposed to the milky color in mature coconut. In Costa Rica as well as in many other countries, the popular pipa is served simply chilled with the shell opened so the customer can drink the liquid inside. During these past two years, the firm engaged in research and development and
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The first two years only have a fixed component. As the product gets moving, most of the S&A expenses will be variable. The fixed part of S&A reflects the salaries of drivers and sales people hired as a result of CocoMix and a minimum level of advertising needed. These expenses are invariant to the level of sales. The pattern for S&A expenses is also provided below. TABLE 1 ($ figures in thousands):
0 Year Sales growth rate Cash as % of sales Inventories as % of sales Current liabilities as % of sales Fixed part of CGS (000's) Variable part of CGS (as % of sales) Fixed part of S&A expenses (000's) Variable part of S&A (as a % previous year of sales) 1 10% 20% 4% $400 30% $3,000 0 2 9% 6% 25% 7% 400 30% 3,000 0 3 15% 6% 12% 7% 400 30% 1,500 20% 4 5% 3% 8% 6% 500 30% 1,500 20% 5 5% 3% 8% 6% 500 30% 1,000 20% 6 2% 3% 8% 6% 600 30% 1,000 20% 7 0% 3% 8% 6% 600 30% 1,000 20% 8 4% 3% 7% 6% 600 30% 1,000 20% 9 4% 3% 7% 6% 600 30% 1,000 20% 10 4% 3% 7% 6% 600 30% 1,000 20%

The following information was obtained from several meetings among the head of the finance, marketing, production, and accounting departments. Great deal of the debate for this project has focused on the use of existing facilities by CocoMix. There isn't a consensus as

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