• Starbucks plans to introduce a new premium tea product with the following expected costs and revenues:
  • Development Costs: $12 million
  • Marketing Expenses: $8 million
  • Estimated Annual Sales: $70 million
  • Variable Costs: $40 million annually
  • Fixed Costs: $15 million annually

• Requirements:
  1. Calculate the break-even point in sales dollars for the new product line.
  2. Prepare a projected income statement for the first year.
  3. Analyze the contribution margin ratio for the new tea product line.
  4. Discuss the strategic benefits of introducing the premium tea line.
  5. Evaluate the impact on Starbucks' overall profitability.