Preston has a Pretzel shop located in a rented 900 square foot building in a

small town of approximately 20,000 people. There is not any major

competition. Preston sells his Pretzels for $3.25 each. The cost to produce these Pretzels is

$1.35 each which includes all ingredients and paper products. He is open six days a week,

closed Sundays and 10 holidays throughout the year. (Use a 365-day year for calculations) over

the past three years in business he is averaging 150 pretzels sold per day. His rent is $800 per

month and his lease ends at the end of the year. Typically, he spends $3,200 per year on radio

and print advertising and $3,000 on promotions with the local high school. Utilities average $900

per month. Phone service including phone, cell phone and internet is $245 per month, vehicle

gas averages $75.00 per month. Insurance is $2,165 per year. He is currently leasing a large

mixer and dishwasher at $140.00 per month total. His store license is $550 per year, he has a

budget of $750 per year for replacement pans and other equipment. Preston has one part time

employee that is paid $12/ hour and works 25 hours per week. (Use 52 weeks) He owns a

service vehicle valued at $15,000. His store equipment has a value of $16,500. And he

maintains an inventory of $975. He has annual depreciation of $2,500. He also has a $20,000

five-year bank loan at 6%. (Calculate the interest for a year)

Assignment

1. Develop a profit and loss statement for Preston's Premium Pretzels. Use proper form Under the selling and administrative expense section of the profit and loss statement list

EACH expense separately.

2. Based on the information you calculated above what is his NOI.

3. The owner of the building has notified Preston that rent for the next five years will be

increased to $1,250 per month. In addition, Preston expects expenses will increase by

5% (rent will remain constant at $1,250 per month) Preston estimates that he will need

to increase sales by 10% to account for the increases in rent and other expenses.

Develop a new P & L statement that reflects the increase in expenses and the projected

increase in sales. Also calculate the NOI for the change.

4. In a narrative statement of approximately 500 to 750 words how is Preston's business

doing? Provide a review of the income statement be specific.