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 averagevariable expense per cup is $0.36. The average fixed expense per month in $1,300. An average of 2,100 cups are sold each month. What is the break-even sales dollars?

A. $1,300
B. $1,715
C. $1,788
D. $3,129

Answer 1

The break-even sales dollars for Coffee Klatch is approximately $1,150.44.

Step-by-step explanation:

In order to calculate the break-even sales dollars for Coffee Klatch, we need to consider the fixed expenses and the variable expenses. The fixed expenses per month are $1,300, and the variable expenses per cup of coffee are $0.36. The average selling price of a cup of coffee is $1.49, and 2,100 cups are sold each month.

To find the break-even sales dollars, we need to divide the total fixed expenses by the contribution margin, which is the selling price minus the variable expenses per cup. So, the break-even sales dollars would be $1,300 divided by the contribution margin.

Let's calculate the contribution margin first:

Contribution margin = Selling price - Variable expenses per cup

= $1.49 - $0.36

= $1.13

Now, let's calculate the break-even sales dollars:

Break-even sales dollars = Total fixed expenses / Contribution margin

= $1,300 / $1.13

= $1,150.44 (approximately)

Therefore, the break-even sales dollars for Coffee Klatch is approximately $1,150.44.