Rio Coffee Shoppe sells two coffee drinks, a regular coffee and a latte. The two

Question

Rio Coffee Shoppe sells two coffee drinks, a regular coffee and a latte. The two drinks have the following prices and cost characteristics: The monthly fixed costs at Rio are $7, 772. Based on experience, the manager at Rio knows that the store sells 60 percent regular coffee and 40 percent lattes. How many cups of regular coffee must Rio sell every month to break even? (Do not round intermediate calculations. ) Number of cups How many cups of lattes must Rio sell every month to break even? (Do not round intermediate calculations. ) Number of cups

Explanation / Answer

BEP = FC/COnt pu COnt pu for Reg Coffee = 1.70-0.70 = 1.00 pu & Cont pu for Latte = 2.70-1.30 = 1.40 pu As Reg Coffee & Latte is sold in ration 60:40, FCs must also be allocated in that Ratio. SO FC for Reg Coffee = 60%*$7772 = $4,663 & FC for Latte = 40%*$7772 = $3109 So BEP for Coffee = 4663/1 = 4663 units BEP for Latte = 3109/1.40 = 2221 units

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