Unit 6 Assignment

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Impacts of Expenses
Lionel Mcmillon
September 13, 2011
AB299-02

Tim’s Coffee Shop is a great business that would seem to benefit from large business moving to the area. Looking at the income statement Tim’s business actually earned a decent profit in 2008. With the new surrounding business to the area this will bring an increase in business volume for the coffee shop along with plenty of new customers. This also could have some negative effects on the business with the increase of some on the expenses that naturally come along with more business volume.

The expenses that probably would be affected the most are supplies, salary, and tax. The business volume would increase which mean more customers. This also means you would need to hire more employees to meet the demand of having more business. So this would affect the salary expense and have a significant increase on it. The increase in profit and sales also means an increase on taxes paid. The business also has to make sure they supply all of the new customers because of the companies being built around them. The supplies will probably have the biggest impact as far as increases in expenses.

The other expenses should either remain the same or decrease. The insurance and rent should stay the same no matter what. The increase in profit and business volume should have no effect on these revenues. The interest should decrease on the loans. As time goes by the money you owe on a loan gets smaller so therefore the interest is actually lower each year until the loan is paid off.

References

http://www.kaldi.com/articles/coffee-equipment/coffee-shop-startup.htm http://www.coffeeforums.com/forum/coffee-industry-forum/7692-coffee-shop-costs- breakdown.html http://www.startingabiz.com/starting-a-coffee-shop-business/
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