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You're managing a small coffee shop. Your plan for the upcoming year is to sell 25,000 cups of specialty coffee at a price of $5 each. The cost of coffee beans, milk, and other ingredients per cup is $2. You also have fixed costs including rent, utilities, and equipment maintenance, totaling $40,000 for the year. Required: 1. Calculate the break-even number of cups of coffee. 2. If the selling price increases, the break-even units will increase or decrease? Why?

You're managing a small coffee shop. Your plan for the upcoming year is to sell 25,000 cups of specialty coffee at a price of $5 each. The cost of coffee beans, milk, and other ingredients per cup is $2. You also have fixed costs including rent, utilities, and equipment maintenance, totaling $40,000 for the year. Required: 1. Calculate the break-even number of cups of coffee. 2. If the selling price increases, the break-even units will increase or decrease? Why?

FINANCIAL ACCOUNTING
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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Chapter 7: Cost-Volume-Profit Analysis You're managing a small coffee shop. Your plan for the upcoming year is to sell 25,000 cups of specialty coffee at a price of $5 each. The cost of coffee beans, milk, and other ingredients per cup is $2. You also have fixed costs including rent, utilities, and equipment maintenance, totaling $40,000 for the year. Required: 1. Calculate the break-even number of cups of coffee. 2. If the selling price increases, the break-even units will increase or decrease? Why?
Transcribed Image Text:Chapter 7: Cost-Volume-Profit Analysis You're managing a small coffee shop. Your plan for the upcoming year is to sell 25,000 cups of specialty coffee at a price of $5 each. The cost of coffee beans, milk, and other ingredients per cup is $2. You also have fixed costs including rent, utilities, and equipment maintenance, totaling $40,000 for the year. Required: 1. Calculate the break-even number of cups of coffee. 2. If the selling price increases, the break-even units will increase or decrease? Why?
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