Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Star Dollar Cafe operates a chain of cozy cafe shops specializing in selling brewed coffee and cake sets for tea time and breakfast. For the

image text in transcribed
Star Dollar Cafe operates a chain of cozy cafe shops specializing in selling brewed coffee and cake sets for tea time and breakfast. For the year ending 31 December 20X5, Star Dollar Cafe had the following Statement of Comprehensive Income for sales of 20,000 set meals (comprising of drink and cakes). Variable cakes and drink costs average $5 per set and the chef's salary includes a salesrelated component giving him a commission of $0.80 per set meal sold. All other costs are viewed as fixed. : With reference to the above information, a) Compute the variable cost per set meal for the year ended 31 December 205. ( 2 marks) b) Compute the total fixed costs for Star Doliar Cafe for the year ended 31 December 205. ( 3 marks) c) The breakeven point in number of set meals (rounded to the nearest whole number) for Star Dollar Cafe for the year ended 31 December 205 (4 marks) d) Draw up a Contribution Mangin Statement for Star Dollar Cafe for the year ended 31 December 205. ( 5 marks) e) The company CEO is considering spending additional funds on advertising its new coffee ice cream product. Using CVP analysis, what are the potential impact of increasing the advertising cost ? Explain. (4 Marks) f) What is the cafe's margin of safety in units of set meals? What does this information tell you? Explain briefly the significance of the term 'margin of safety'. (4 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Payroll Accounting

Authors: Bernard J. Bieg, Judith A. Toland

2013 edition

113396253X, 978-1133962533

More Books

Students also viewed these Accounting questions

Question

What lessons in OD contracting does this case represent?

Answered: 1 week ago

Question

Does the code suggest how long data is kept and who has access?

Answered: 1 week ago