Headline from The Motley Fool, August 6, 2013:

“Can Anything Stop SodaStream?”

http://www.fool.com/investing/general/2013/08/06/can-anything-stop-sodastream.aspx

SodaStream’s net income has increased by more than 50%.

SodaStream’s sales have increased by 25 – 28% while Coke’s sales have fallen by 4%.

Question 1: Assume a consumer purchases the SodaStream system. What type of cost is the SodaStream soda maker (machine)? What type of cost is the carbonator refill? What type of cost is the SodaMix?

Question 1: ANSWERSodaStream soda maker (machine) - a fixed cost and a sunk costCarbonator refill – a variable costSodaMix – a variable cost

Question 2: Calculate the variable cost per can of SodaStream soda.

Estimated costs of a SodaStream systemTotal cost

SodaStream Fountain Jet Soda Maker (including empty carbonator) $ 60.00

Carbonator-refill (makes 60 liters or 165 cans of soda) $ 15.00 5 SodaMixes (makes 60 liters or 165 cans of soda) $ 25.00

Question 2: SOLUTION Calculate the variable cost per can of SodaStream soda.

Estimated costs of a SodaStream systemTotal cost

VC per can

SodaStream Fountain Jet Soda Maker (including empty carbonator) $ 60.00 NACarbonator-refill ($15.00 / 165 cans of soda) $ 15.00 $0.0909 5 SodaMixes ($25.00 / 165 cans of soda) $ 25.00 0.1515 Cost per can $0.2424

Question 3a: Calculate the total cost per can of SodaStream soda assuming that the consumer makes (a) 165 cans of soda.

Estimated costs of a SodaStream systemTotal cost

SodaStream Fountain Jet Soda Maker (including empty carbonator) $ 60.00

Carbonator-refill (makes 60 liters or 165 cans of soda) $ 15.00 5 SodaMixes (makes 60 liters or 165 cans of soda) $ 25.00

Question 3a: SOLUTION Calculate the total cost per can of SodaStream soda if 165 cans are made.

Estimated costs of a SodaStream systemTotal cost per can

SodaStream Fountain Jet Soda Maker ($60.00 / 165 cans) $0.3636Carbonator-refill 0.0909 5 SodaMixes 0.1515 Cost per can $0.6061

Question 3b: Calculate the total cost per can of SodaStream soda assuming that the consumer makes (b) 330 cans of soda.

Estimated costs of a SodaStream systemTotal cost

SodaStream Fountain Jet Soda Maker (including empty carbonator) $ 60.00

Carbonator-refill (makes 60 liters or 165 cans of soda) $ 15.00 5 SodaMixes (makes 60 liters or 165 cans of soda) $ 25.00

Question 3b: SOLUTION Calculate the total cost per can of SodaStream soda if 330 cans are made.

Estimated costs of a SodaStream systemTotal cost per can

SodaStream Fountain Jet Soda Maker ($60.00 / 330 cans) $0.1818Carbonator-refill 0.0909 5 SodaMixes 0.1515 Cost per can $0.4242

Question 3c: Calculate the total cost per can of SodaStream soda assuming that the consumer makes (c) 990 cans of soda.

Estimated costs of a SodaStream systemTotal cost

SodaStream Fountain Jet Soda Maker (including empty carbonator) $ 60.00

Carbonator-refill (makes 60 liters or 165 cans of soda) $ 15.00 5 SodaMixes (makes 60 liters or 165 cans of soda) $ 25.00

Question 3c: SOLUTION Calculate the total cost per can of SodaStream soda if 990 cans are made.

Estimated costs of a SodaStream systemTotal cost per can

SodaStream Fountain Jet Soda Maker ($60.00 / 990 cans) $0.0606Carbonator-refill 0.0909 5 SodaMixes 0.1515 Cost per can $0.3030

Question 4: Calculate the cost per can of Coke assuming that a 24-pack costs $7.99.

Question 4: Calculate the cost per can of Coke assuming that a 24-pack costs $7.99.

SOLUTION: $7.99 / 24 = $0.3329 per can

Question 5: Assume that a consumer plans to make one can of soda per day with the SodaStream system. After a year, will this system save the consumer money over the cost of purchasing Pepsi or Coke in 24-packs?

Question 5: Assume that a consumer plans to make one can of soda per day with the SodaStream system. After a year, will this system save the consumer money over the cost of purchasing Pepsi or Coke in 24-packs?

ANSWER: No, the consumer will not save money at a volume of 365 sodas per year.

Question 6: Upon studying the per-can costs of the 990-can level, the consumer then decides to make three cans of soda per day for a year to experience the per-can cost savings. Where is the consumer’s logic flawed in this scenario?ANSWER: The cost of the machine is a SUNK cost and should not be considered.

Question 7: What reason(s) might a consumer have for purchasing this system besides cost savings?

ANSWER: Less waste (cans/bottles) going into landfills. Can customize flavors by mixing various syrups. Can make seltzer water and not drink soda (more healthy). Less to transport from store.