Scenario: The Coffee Shop Expansion

Reading Passage

Sarah runs a coffee shop. Her fixed costs (rent, salaries) are $5,000 per month. Each cup of coffee sells for $4.00. The variable cost per cup (beans, milk, sugar) is $1.50. Sarah is considering a new marketing plan that will increase fixed costs by $1,000 but increase volume by 20%.
Question 1 of 5

What is the Contribution Margin per cup?

Question 2 of 5

How many cups must be sold to break even (current state)?

Question 3 of 5

What is the new breakeven point if fixed costs increase to $6,000?

Question 4 of 5

If Sarah currently sells 3,000 cups, what is her current profit?

Question 5 of 5

The "Margin of Safety" measures:

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