Question

BTN 18-7 Sweetgreen, launched by entrepreneurs Nic Jammet, Jon Neman, and Nate Ru, is a fast-casual restaurant brand devoted to healthy salad choices. The company also sells T-shirts, hats, and other apparel.

Required

1. Identify at least two fixed costs that will not change regardless of how much salad Sweetgreen sells.

2. Sweetgreen is expanding. How could overly optimistic sales estimates potentially hurt its business?

3. Explain how cost-volume-profit analysis can help Nic, Jon, and Nate manage Sweetgreen.

Answer 1

1.Two fixed costs that will not change irrespective of how many salads Sweetgreen sells are the rent paid for the store and salaries paid to the store staff.

2.An overly optimistic sales expectations can result in underestimation of costs, stocking more inventory than necessary to conduct the sales.

3. Cost volume profit analysis is a variable costing analysis which analyses the sales and variable costs relationship through a contribution margin. Contribution margin is the difference between sales and variable costs incurred for the sales. It helps in analysing the store the extra costs that will be incurred for the incremental sales that it expects.