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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 25% discount each time they return with the cup to buy a cup of coffee. Each week Starcups serves 55,000 customers who purchase an average of 2.50 cups of coffee per week (137,500 cups total). Starcups's contribution margin income statement for a typical week is shown below: Sales Revenue Variable Cost Contribution Margin Fixed Costs Net Operating Income Units Per Unit Total 137,500 $7.00 $962,500 137,500 3.00 412,500 137,500 $4.00 $550,000 115,000 $435,000 Assume the new cup promotion is expected to impact sales volume, revenue, fixed, and variable costs as follows: Starcups estimates that 25% of its current customers (13,750) will participate in the promotion. The remainder of its existing customer base (41,250) will continue to buy an average of 2.50 cups of coffee per week. Starcups expected to attract 6,500 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 25% discount on repeat visits when they bring back their reusable cup. The additional variable cost of purchasing the reusable cup is $3.00. The variable cost savings of the paper cup is $.20. 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 $25,000 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 operating income. 2. Compute the difference in total revenue, total variable costs, total contribution margin, total fixed costs, and total operating income before and after the promotion. 3. How will this sustainability initiative impact the company's triple bottom line? Units Per Unit Total S 0 Customers who do not participate: Sales Revenue Variable Costs Contribution Margin S 0 0 02 0 First purchase for customers to buy the reusable cup: Sales Revenue Variable Costs Contribution Margin 02 0 S 0 S 0 Repeat visits for customers who buy the reusable cup: Sales Revenue Variable Costs Contribution Margin S 0 S 0 Riverside Inc. makes one model of wooden canoe. Partial information for it follows: 600 800 950 Number of Canoes Produced and sold Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $129,000 228,000 $357,000 $ 172,000 $204,250 228,000 228,000 $ 400,000 $432,250 $ 215.00 380.00 $ 595.00 $ 215.00 285.00 $ 500.00 $ 215.00 240.00 $ 455.00 Riverside sells its canoes for $670 each. Next year Riverside expects to sell 1,000 canoes. Required: Complete the Riverside's contribution margin income statement for each independent scenario. Assuming each scenario is a variation of Riverside's original data. (Round your unit contribution margin and contribution margin ratio to 2 decimal places (.e. 1234 should be entered as 12.34%) and all other answers to the nearest dollar amount.) Scenario 1 Raises Scenario 2 Increase Sales Price to $770 Sales Price and Scenario 3 per Canoe Variable Cost per cost by 20 Percent Decrease Fixed Unit by 10 Percent Unit Contribution Margin Contribution Margin Ratio % % % Contribution Margin Income Statement Contribution Margin Net Operating Income
