Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a reusable cup.During the cup promotion, customers would pay an extra $1.00 for the reusable cup and would receive a 20% discount each time theyreturn with the cup to buy a cup of coffee.Each week Starcups serves 46,000 customers who purchase an average of 3.00 cups of coffee per week (138,000 cups total).Starcups's contribution margin income statement for a typical week is shown below:Units Per Unit138,000138,000Total$5.20 $717,600289,800$3.10 $427,800Sales RevenueVariable Cost2.10Contribution Margin138,000Fixed Costs106,000Net Operating Income$321,800Assume the new cup promotion is expected to impact sales volume, revenue, fixed, and variable costs as follows:• Starcups estimates that 30% of its current customers (13,800) will participate in the promotion. The remainder of its existingcustomer base (32,200) will continue to buy an average of 3.00 cups of coffee per week.• Starcups expected to attract 5,600 new customers to participate in the promotion. Customers who participate in the promotion will pay an additional $1.00 for the reusable cup. They will then receive a 20%discount on repeat visits when they bring back their reusable cup.• The additional variable cost of purchasing the reusable cup is $2.10. The variable cost savings of the paper cup is $.35.Starcups expects that customers who participate in the reusable cup promotion will visit an average of 5 times per week,including the first purchase of the reusable cup.• Starcups will spend a total of $16,000 per week advertising the reusable cup promotion.Required:1. Prepare a contribution margin income statement to predict how the reusable cup promotion will impact weekly net operatingincome.2. Compute the difference in total revenue, total variable costs, total contribution margin, total fixed costs, and total operating incomebefore and after the promotion.3. How will this sustainability initiative impact the company's triple bottom line?

Working Notes:- 1) The customers who do not participate in the promotion are 32,200 (as given in the…

Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a reusable cup. During the cup promotion, customers would pay an extra $1.00 for the reusable cup and would receive a 20% discount each time they return with the cup to buy a cup of coffee. Each week Starcups serves 46,000 customers who purchase an average of 3.00 cups of coffee per week (138,000 cups total). Starcups's contribution margin income statement for a typical week is shown below: Units Per Unit 138,000 138,000 Total Sales Revenue Variable Cost Contribution Margin $5.20 $717,600 289,800 $3.10 $427,800 2.10 138,000 Fixed Costs 106,000 Net Operating Income $321,800 Assume the new cup promotion is expected to impact sales volume, revenue, fixed, and variable costs as follows: • Starcups estimates that 30% of its current customers (13,800) will participate in the promotion. The remainder of its existing customer base (32,200) will continue to buy an average of 3.00 cups of coffee per week.

Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a reusable cup. During the cup promotion, customers would pay an extra $1.00 for the reusable cup and would receive a 20% discount each time they return with the cup to buy a cup of coffee. Each week Starcups serves 46,000 customers who purchase an average of 3.00 cups of coffee per week (138,000 cups total). Starcups's contribution margin income statement for a typical week is shown below: Units Per Unit 138,000 138,000 Total Sales Revenue Variable Cost Contribution Margin $5.20 $717,600 289,800 $3.10 $427,800 2.10 138,000 Fixed Costs 106,000 Net Operating Income $321,800 Assume the new cup promotion is expected to impact sales volume, revenue, fixed, and variable costs as follows: • Starcups estimates that 30% of its current customers (13,800) will participate in the promotion. The remainder of its existing customer base (32,200) will continue to buy an average of 3.00 cups of coffee per week.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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