Final Take-Home Exam

Fall 2018 - BUSM 4010-003

Professional Business Plan Development
David Prinster
University of Colorado

Instructions and Notes:

 The entire exam is based on the fictitious Case Study described on page 2.
 There are 2 scenarios, described on pages 3 & 5, each with a task that you must complete.
 Each Task is worth 50 points, for a total of 100 points possible.
 DUE: Submission of this exam must be submitted to the corresponding assignment folder on Canvas
by Tuesday, December 18th at 6:15pm Mountain Time. Late submissions will be heavily penalized.
 Format:
o Use this document and write your answers in the spaces provided.
o Answers to each question can be single or double spaced lines, but MUST stay within the page
limit specified. There will be deductions for going beyond the page limit. 11 or 12 point Calibri
or Arial font preferred.
 Grading: There is no single correct answer to the scenario tasks. You will be graded on the following
criteria:
o Provide a compelling write-up of your own position, thoughts, ideas, and recommendations.
 Convey your position clearly and convincingly
 Show creative and individual thought
 Provide appropriate information and assumptions to support your positions
o Demonstrate good business writing skills
o Follow directions
 Students can refer to the readings and slide decks used in class throughout the semester, but are not
expected to provide references to any of these materials in the exam write-ups.
 Students are expected to work individually on your own exam and abide strictly to the CU Honor Code.

Good Luck!

1
Case Study: After graduating from CU with a Business Minor a few years ago, a group of students started a
natural foods company called “Yummi Snacks”. Inspired by a professor that would always bring junk food into
the class, they wanted to create a snack that was a nutritious meal-replacement targeting busy students that
would be differentiated by its simple ingredients and packaging. Their first product was called the “Yummi
Stick”.

The Yummi Stick was all natural, gluten-free, non-dairy, snack made from nuts, fruit extracts, egg whites and
natural flavorings. The packaging and product design was unique. The Yummi Stick was so called because it
was about twice the length and half the width of a typical health bar and with a cylindrical shape. The
packaging was eye-catching with graphics of the one main flavor ingredient covering the entire package (eg.
blueberries, cocoa beans, or cinnamon sticks). The competitor they measured themselves most closely
against was the RXbar (https://www.rxbar.com ). Each Yummi Stick was about the same size (about 2 ounces)
and retail price ($1.99 each) as the RXbar.

The Yummi Stick was targeted primarily at college students. Last year, Yummi Sticks were sold on 20 college
campuses across the US through their cafeterias, bookstores, and eateries. The schools purchased the Yummi
Sticks in bulk at a cost of $1.49 each and were sold at their standard retail price of $1.99 each.

Last year, the Yummi Snacks company achieved revenues of $600,000 and a 50% gross profit. This coming
year, their business plan is to add an additional 5 colleges and project revenues to grow to $800,000 at the
same unit pricing and gross profit level.

You must now assume the role of CEO for Yummi Snacks. Read the following scenarios and write your
response to each one in the space provided and according to the directions provided above.

Good Luck!

2
Scenario #1 (50 points): As the CEO, you want to keep innovating your product and are now considering a
new one called “Yummi Bites”, which essentially will be the Yummi Stick carved into bite size pieces and sold
in re-sealable pouches. Your marketing team has done research that suggests that many students would
prefer the Yummi Bite product and package design as it would allow them to graze-eat the product
throughout the day while keeping it fresh and reduce the mess that a partially eaten Yummi Stick can cause in
their backpacks. You also believe you should double the volume of the product to 4 ounces and increase the
retail price of each pouch to $3.49. Colleges will buy the product in bulk at a cost of $2.99 per unit which
maintains a 50% gross margin for your company.

Creating a successful new product in Yummi Bites will come at a cost, however. Your estimates indicate it will
require one-time costs of $90,000 to design and reconfigure a new manufacturing process and $1,000 in sales
and marketing costs per college campus. You project that Yummi Bites will generate incremental sales of 2000
units per college campus in year 1 and 4000 units per college campus in years 2 and 3.

Your Task: Due to the additional investment required, you must get approval from your Board of Directors
(which includes investors) to proceed with the Yummi Bites plan. The Board is already familiar with the idea
and the market opportunity, but they have not yet seen the business justification. You must draft a 1-page
proposal letter directed to the Board that provides a clear and compelling business justification for Yummi
Bites.

(write your response on the next page).

3
Scenario #1 Task: write a 1 page summary to the Board of Directors for the Yummi Bites proposal: (write your
response below)

4
Scenario #2 (50 points): (pretend the aforementioned Scenario #1 is NOT happening).
As the CEO, you are always looking for new ways to grow revenues and think you’ve found a niche through
local high-schools. Inspired by your former CU professor who tried and failed to create a new fund-raising
vehicle for K-12 schools, you think that partnering with high-schools and their fundraising efforts could prove
profitable in many ways.

Preliminary research indicates that for every college campus you’re selling to, there are at least 5 area high-
schools that could be prime targets nearby. The Yummi Stick itself would not need to change but you will
need to create a unique bulk-size package that is only available through schools at a price that appeals to
parents, family, friends, and neighbors of the kids who will be peddling the product during their fundraising
campaigns. You think that a box of 15 Yummi Sticks at a retail price of $24.99 would be an attractive package
for that market. You will sell each box to the school for $19.99 and the school keeps the difference. You
estimate that you could sell an average of 500 boxes through each high-school per year.

The one-time costs associated with this new strategy are fairly minimal. You have a great relationship with the
contract manufacturer of your product who will not charge any up-front fees for the package redesign, mostly
because they love the idea of helping schools with their fundraising efforts. The only incremental one-time
costs will be $500 in marketing for each new high-school you sign-up.

However, your pricing strategy per package, although beneficial to the schools, will squeeze your gross profits,
and increase your Cost of Goods Sold to 70%.

You’ve casually discussed this idea with various employees and the feedback has been mixed. Some are very
excited about the idea and think it could benefit the company and its various stakeholders in many ways.
Others are concerned about the viability of the high-school market, the thinner profit margins, and whether
this could hurt your core business. After weeks of casual debates, everyone is looking to you to make a
decision.

Your Task: As the CEO, you need to establish a firm position on this idea and get everyone on the same page,
either for or against it. Write a 1-page letter to your employees explaining your position. Justify your position
with clear and compelling reasons and supporting data. Remember, you are the CEO and your decision is
final, and this letter needs to clearly convey your thoughts in the tone you want to project as a leader.

(write your response on the next page).

5
Scenario #2 Task: Write a 1 page memo to your employees to explain your position on a new High-School
strategy: (write your response below)