Question

Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. The average fixed expense per month is $1,300. Use the formula method to determine how many cups of coffee would have to be sold to attain target profits of $2,500 per month.

Answer 1

Answer:

Break-even point= 3,363 cups of coffee

Explanation:

Giving the following information:

The average selling price of a cup of coffee is $1.49

The average variable expense per cup is $0.36.

The average fixed expense per month is $1,300.

Desired profit of $2,500 per month.

We need to use the break-even point formula including the desired profit:

Break-even point= (fixed costs + desired profit)/ contribution margin

Break-even point= (1,300 + 2,500) / (1.49 - 0.36)

Break-even point= 3,800/ 1.13

Break-even point= 3,363 cups of coffee