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.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10EB: Keleher Industries manufactures pet doors and sells them directly to the consumer via their web...

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Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
Berry Farm produces organic tomatoes and strawberries. In June 2024, it transported 125 boxes of strawberries with a price of $24 per box to the Bay Farmers’ Market. Berry Farm paid an upfront fee of $200 to present its products at the market for one week, and the market earns a 20% profit margin on each item sold, but Berry Farm is responsible for any items that remain unsold at the end of the week. Required: The market was able to sell 80 boxes of strawberries to customers. How much revenue should Berry Farm recognize with respect to this transaction?
Gooby Gummies makes taffy candy, which it sells at local supermarkets. The fixed monthly cost to produce the candy is $4,000. The main ingredient for the candy, glucose syrup costs $0.21 per pound. Gooby Gummies sells the taffy for $0.75 per pound to supermarkets. The management of Gooby Gummies is thinking of raising the price of the taffy candy to $0.95 per pound. Currently, the company produces and sells 9,000 pounds of taffy candy a month. The management realizes that if they raise the price, the sales will go down to 5,700 pounds per month. By how much will the company's profit per year be affected if Gooby Gummies' management decide to raise the price? Should the company raise its price? Explain your answer.
Gooby Gummies makes taffy candy, which it sells at local supermarkets. The fixed monthly cost to produce the candy is $4,000. The main ingredient for the candy, glucose syrup costs $0.21 per pound. Gooby Gummies sells the taffy for $0.75 per pound to supermarkets.The management of Gooby Gummies is thinking of raising the price of the taffy candy to $0.95 per pound. Currently, the company produces and sells 9,000 pounds of taffy candy a month. The management realizes that if they raise the price, the sales will go down to 5,700 pounds per month. By how much will the company's profit per year be affected if Gooby Gummies' management decide to raise the price? Should the company raise its price? Explain your answer.
XYZ, a grocery store, is considering offering one hour photo developing in their store. The firm expects that sales from the new one-hour machine will be $150,000 per year. XYZ currently offers overnight film processing with annual sales of $100,000. While many of the one-hour photo sales will be to new customers, XYZ estimates that 60% of their current overnight photo customers will switch and use the one-hour service. What is the minimum amount of sales from the one-hour service to justify the investment ?
. Powered by Koffee (PBK) is a new campus coffee store. PBK uses 50 bags of whole bean coffee every month, and demand is steady throughout the year. PBK has signeda contract to purchase its coffee from a local supplier, Phish Roasters, for a price of $25 per bag and an $85 fixed cost for every delivery independent of the order size. PBK incurs an inventory holding cost of 24% per year. a. If PBK orders 125 bags at a time, how many orders will it place per year?b. What is PBK’s annual inventory holding cost per bag? c. If PBK orders 200 bags at a time, what is its inventory holding cost per year? d. What order quantity minimizes PBK’s ordering and holding costs per year?If PBK chooses an order quantity to minimize ordering and holding costs, what is its ordering and holding costs per year expressed as a percentage of its annual purchase cost? A South American import/export company has offered PBK a deal. PBK can buy a year’s worth of coffee directly from South America for $20 per bag…
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Annie's Homemade has been invited to submit a bid to cater a Memorial Day picnic with 60 servings of four flavors for a total of 240 pre-packaged servings of ice cream. Annie's' average ingredient and packaging costs (including cup, lid, spoon, and stickers) are $1.50 per serving. It would cater the event with one manager, whose is paid an annual salary of $40,000 (or an average of $20.00 per hour), and two additional employees who are paid $8.00 per hour. The wedding party expects Annie's staff to remain on-site for two hours to serve ice cream. The round-trip drive time to the event plus the tent setup and breakdown time is 1.50 hours. The wedding is 40 miles round-trip and the company pickup truck's diesel fuel, diesel exhaust fluid, and oil expenses are $0.75 per mile. The manager catering the wedding would also spend 3.5 hours manufacturing the ice cream for the picnic and portioning it into six-ounce paper cups. He would be assisted by one employee for two hours who would apply a…