Purpose

To outline how in my perspective, the managerial accounting methods and theories can

be applied to my area of work that I admire.

Introduction:

The Snack Shop, a student-run convenience store is the business idea that I and my college

fellows own, located in the academic building housing the Business Department of a small

Canadian College campus. The store runs under the umbrella of a student organization – The

Business Student Club (BSC). The BSC is chartered and recognized on campus by the Student

Association for more than 40 years, and receive limited funding for its activities. The Snack

Shop is a major continuous source of income for the BSC for over 30 years.

The Snack Shop is managed by a set of five students from re-known universities, under the

advisement of faculty members from any Business Department. The internship titles are CEO,

Inventory/Facilities, Finance, Human Resources, and Marketing. The store is staffed by

student volunteers, most of whom are the members of the BSC. In order to maintain its status as

an internship site, the Shop has to be run as an independent business. The Shop is required

to make a contribution each semester to the Business Department budget to simulate rent and

overhead costs. Each semester the Snack Shop budget included a $750 allocation to the BSC

to help offset the cost of its annual educational trip to Ottawa city, with any remaining profit

going toward improvements in the facilities. Any shortfall would come from accumulated net

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assets. In addition to dealing with the general challenges of running a business, we are

expected to continuously improve and evolve the Shop so that it would be sustainable as a

learning lab for the Business Department.

In spring 2022, Snack Shop sales were cash only, with the option for customers to set up a

prepaid account by paying cash or tendering a personal check in advance. This option often

caused problems for clerks who were not trained properly on how to account for the initial

setup and sales from prepaid accounts. The option of accepting FoodFunds was investigated in

previous years, but students were unsure of the procedures for meeting the requirements

necessary for setup: setting up a centralized bank account with the Student Association office

that could receive FoodFunds, leasing a specialized card reader, monitoring activity in the new

bank account, securing timely purchase orders and requisitioning funds from the account to

purchase inventory and supplies, collecting and remitting sales tax on taxable items, training

staff, and upgrading the accounting and reporting systems. However, as a Shop intern I felt that

accepting FoodFunds was necessary to be able to remain competitive, so I investigated

the process (Figure 1)

The Snack Shop is offering a limited range of snacks, beverages and convenience items for its

customers. Table I shows the major product categories, average selling prices, percent of sales,

and the gross profit percentages for each product category. The four major categories consisted

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of coffee and tea (cost analysis in Table II), bottled and canned beverages (water, soda, energy

and sports drinks, etc.), snacks and candy (sandwich, chips, cookies, granola bars, chocolate

bars, gum, etc.), and other (donuts, bagels, yogurt, fruit, ramen, macaroni and cheese, etc.).

Most inventory items are purchased at local grocery or bulk food stores (using a sales tax-

exempt certificate) and then resold, collecting sales tax on taxable items. Due to health code

regulations, the Shop can not cook or prepare food on the premises, nor can they sell items that

had to be maintained at a certain temperature. Refrigerated and frozen items are allowed. School

supplies cannot be sold due to an exclusive contract granted to the College bookstore and its

affiliates.

Since coffee and tea sales are the only combined cost products sold, an analysis of their costs is

included.

Each day the sales spreadsheet is totaled and the cash drawer is counted (leaving $75.00 starting

cash in the drawer). Sales per the spreadsheet are compared to actual cash receipts and cash over

or short are recorded. Overages or shortages are investigated. In general, major shortages can be

traced to emergency inventory purchases using register cash, and major overages can be traced to

prepaid account deposits not included in the sales spreadsheet. No other major overages or

shortages are noted. At the end of each day, the person closing the shop prepared the daily sales,

prepaid activity, and cash over/short report and placed the cash receipts in the safe in the Shop.

On Monday morning the Finance intern deposited the previous week’s receipts (the on-campus

office where their account held and is closed before the Snack Shop closed on Friday). The

average number of transactions (customers) per day is 17, with an average purchase of $2.00;

therefore sales averaged $34 daily and $170 weekly.

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Strategic challenge

The BSC is at an important juncture of its history. Due to the opening of the well-known

international coffee chain in its building, the Snack Shop must compete in order to survive. This

new competitor has a negative impact on the Snack Shop’s spring 2022 sales and profits, and

will continue to do so unless the Shop rise to this strategic challenge.

One strategic move considered by the Shop is accepting Food Funds. Based on market research

conducted by me, Food Funds will significantly impact a student’s choice to shop at the Snack

Shop and support a student organization rather than the College-run store. With the acceptance

of Food Funds, the Shop can hope to triple customer traffic. The number of daily transactions is

estimated to increase from 17 to 50. The estimated dollar value of each transaction will remain at

$2.00. The average number of full business days per semester is estimated to be 60 for analysis

purposes. The cost of accepting Food Funds is a combination of fixed and variable costs. The

card scanner/reader cost $30.00 per month to lease. Each transaction using Food Funds will cost

$0.10. In addition, there is an 8 percent fee for each sale on Food Funds (8% x sales price). The

$30.00 per month charge on the reader will have to be paid even when the store is closed for

winter and summer breaks in order to keep the account active.