John Jitters, owner of the Virtual Buzz Coffee House, has a dilemma. Many customers have expressed disappointment
Question:
John Jitters, owner of the Virtual Buzz Coffee House, has a dilemma. Many customers have expressed disappointment that the Virtual Buzz does not serve espresso hot chocolate. Currently, Virtual Buzz serves both espresso and hot chocolate separately, but not together. The espresso sells for \($2.75\) per shot and costs \($0.95\) to make. The hot chocolate sells for \($3.75\) per mug and costs \($0.75\) to make. If John were to make espresso hot chocolate, he would sell it for \($4.50,\) but it would cost \($1.60\) per mug to make.
Monthly sales of espresso and hot chocolate are currently 3,000 shots and 300 mugs, respectively. Based on customer responses, John estimates that he could sell 500 mugs of the espresso hot chocolate per month, but his sales of hot chocolate would be cut in half. John does not feel that his other beverage sales will be affected.
Should John add espresso hot chocolate to his product mix?
Step by Step Answer:
Management Accounting In A Dynamic Environment
ISBN: 9780415839020
1st Edition
Authors: Cheryl S McWatters, Jerold L Zimmerman