ACCT201 Chapter 5 Team Competition 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 average variable expense per cup is $0.36. The average fixed expense per month is $1,300. An average of 2,100 cups are sold each month. 1. What is the CM Ratio for Coffee Klatch? 2. If Coffee Klatch increased its sales by $1,000, what would management expect profit or net operating income to increase? 3. What is the break-even sales in units? 4. What is the break-even sales dollars? 5. Determine how many cups of coffee would have to be sold to attain target profits of $2,500 per month. 6. Determine the sales dollars that must be generated to attain target profits of $2,500 per month 7. What is the margin of safety expressed in cups? 8. What is the current operating income given that 2,100 cups are sold each month? 9. If the manager would like to promote sales by reducing selling price by $0.1 per cup. This will increase sales volume by 300 cups. What is the change in net operating income? 10. The manager proposes that the coffee shop purchases different containers to save the average variable expense per cup by $0.1. However, the coffee shop needs to pay for additional shipping fees $150 per month to receive these containers. What is the change in net operating income? Should the coffee shop accept this proposal? 211