Best friends, Nathan and Cody, decided to start their own business which would bring great coffee from all over the world to their local community.Together they have formed Classic Coffee Company, or CCC (assume their coffee shop is located a few miles from our college campus).Nathan is selecting and making the coffee they serve.Cody manages the front and back office; selling coffee to customers, paying employees, and running ads for the coffee shop.

Last year, the company sold 45,000 units and had the below sales and cost figures.

Sales$ 135,000.00

Variable Costs$40,500.00

Contribution Margin$94,500.00

Fixed Costs$49,980.00

Income Before Taxes$44,520.00

Income Tax$13,356.00

Net Income$31,164.00

The team have been in business for a year.With competition rising in the coffee industry, they know that another challenging and competitive year lies ahead of them.They are considering two alternatives and have hired you to help them make some important business decisions.

Alternative 2 - Drive Thru

CCC is thinking about having a drive-thru installed.Having this amenity would help the coffee shop increase its customer base, allowing them to reach a greater number of customers.This added convenience would permit CCC to slightly increase the price of its average coffee and would not increase the per unit variable costs for the company.The following data pertains to adding the drive-thru option:

• This alternative is exclusive of alternative 1
• Total sales in the number of units would increase by 140% from last year.
• The construction of the drive-thru would increase fixed costs by $129,420 - which represents one-time construction and installation costs.
• This alternative would allow CCC to increase their average sales price to $3.20 a cup of coffee and their variable cost per unit would remain the same at $0.90 per unit.

Question:

1.) What is the: Contribution Margin - Total (Show work please)

6.) What is the: Contribution Margin - Per Unit (Show work please)