Question 3: CUP Analysis and Costing Methods [15 marks] Green Tea is a business that currently manufactures and sells tea pots. The business is located in a regional sized town and currently leases a large premises for the manufacturing and warehousing distribution of their product. The business currently has ten [10] employees and is looking to expand their business with an introduction of a new product teacups. As Green Tea's management accountant you have been researching sales market data and costs associated with implementing this new product line. You have decided to prepare the owners of the business a CVP analysis to demonstrate your findings as to the viability of the new product. The following is the sales market data and costings that you have prepared. Variable Costs [per cup]: Direct materials 5035 Direct labour $0.50 Variable overhead $0.25 Annual fixed costs of the business are as follows with 30% to be applied to the manufacture of the new product. Fixed posts Lease costs $36,000 Council rates 5 6.000 Administration salaries $60,000 Advertising costs $15,000 lnsu rance 5 3,000 The estimated selling price to customers for the teacups is $3.50 per cup. 1. How many teacups will Green Tea need to sell in order to breakeven? Ensure that you show all formulas and workings. [3 marks} 2. What will be the contribution margin ratio for the teacups? Ensure that you show all formulas and workings. [2 marks] 3. Ignoring income taxes, Green Tea are forecasting that theyr will earn a target net prot of $10,000 from the introduction of the teacup product. How many teacups will they need to sell to achieve this target prot? [2 marks] 4. Green Tea plan on selling 20,000 tea cups in their first year. Calculate their margin of safety in units. What are the implications of this margin of safetyr for Green Tea? [4 marks]