Essays on Margin Of Safety

Value Chain

The objective of analyzing Monster’s value chain is to make a product that will become popular to its customers, which includes not only the production segment but also marketing and distribution (Horngren and Data, 2015). This is because products will eventually need to be discontinued due to changing customer preferences and product innovation from competitors. This means that the company’s core operations and its products must continuously evolve and this could be done using the value chain analysis tool. For an energy drink company like Monster, one of its main goals is to continuously adapt to the ...

Cost structure

Monster Beverage Corporation is a manufacturer and distributor of energy drinks. The cost structure of the company consists of both fixed and variable costs. The unit price for a can of Monster Energy drink sells at an average price of $7.90.

Variable costs

Monster’s variable costs include the cost of concentrates and beverage bases, the cost of raw materials, re-packing costs and co-packing costs. The company’s raw materials include cans, flavours, containers, bottles, packing materials and ingredients. The table below indicates each of the variable cost items and the respective costs per can of Monster’s Energy Drink.

Contribution margin

Contribution ...

Recommendations to the Restaurant Manager

In the current state, the restaurant is profitable. The break-even point is 89,474 covers with a margin of safety of 10,526 covers, and the net profit is £60,000. This implies that the restaurant sales have to fall, by at least 10,526 covers for it to start making losses. The manager has several considerations to make on measures to improve the profitability of the restaurant. The available options and offers are discussed below.

Reducing the price to £10.00

If the price is reduced to £10.00, there will be a rise in sales to 12,000 covers. The contribution margin will fall ...