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b. The Barco Company provides the following cost information: Sale price per cup $.25 100% Variable expense per cup: Commission to State University $.06
b. The Barco Company provides the following cost information: Sale price per cup $.25 100% Variable expense per cup: Commission to State University $.06 Soft drink in each cup .05 Cost of each paper cup 02 .13 52% Contribution margin per cup $.12 48% Fixed expenses (per game): Lease cost of booth Wages of 15 hawkers at $10 each Liability insurance Total $200 150 10 $360 Should The Barco Company enter into a lease agreement with State University for a booth in the new stadium? In coming to a decision, the company will have to resolve questions such as the following: a. What would be the break-even point for the booth in number of cups sold, and in dollars of sales? If The Barco Company needs a minimum $600 in profits per game, how many cups will have to be sold? What will the dollar sales be? If the booth is very successful and State University decides to double the lease cost, what will be the effect on the break-even point? How many cups will have to be sold to yield the minimum required $600 in profits?
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