Starbucks Corporation provides the following information for its coffee sales:
•Selling price per cup: $4
•Variable cost per cup: $2.50
•Fixed costs: $500,000
Required:
1.Calculate the break-even point in units and dollars.
2.Determine the margin of safety in units and dollars if actual sales are 200,000 cups.
3.Discuss the importance of break-even analysis for business decision-making.