Starcups Coffee Company is launching a new sustainability initiative that would reward customers for purchasing a reusable cup. During the cup promotion, customers would pay an extra $1.00 for the reusable cup and would receive a 20% discount each time they return with the cup to buy a cup of coffee. Each week Starcups serves 51,000 customers who purchase an average of 2.50 cups of coffee per week (127,500 cups total). Starcupss contribution margin income statement for a typical week is shown below:

Assume the new cup promotion is expected to impact sales volume, revenue, fixed, and variable costs as follows:

- Starcups estimates that 25% of its current customers (12,750) will participate in the promotion. The remainder of its existing customer base (38,250) will continue to buy an average of 2.50 cups of coffee per week.

- Starcups expected to attract 6,100 new customers to participate in the promotion.

- Customers who participate in the promotion will pay an additional $1.00 for the reusable cup. They will then receive a 20% discount on repeat visits when they bring back their reusable cup.

- The additional variable cost of purchasing the reusable cup is $2.60. The variable cost savings of the paper cup is $.20.

- Starcups expects that customers who participate in the reusable cup promotion will visit an average of 4 times per week, including the first purchase of the reusable cup.

- Starcups will spend a total of $21,000 per week advertising the reusable cup promotion.

Units Per Unit Total Sales Revenue Variable Cost Contribution Margin Fixed Costs 127,500 $6.20 $790,500 2.60 331,500 127,500 $3.60 $459,000 111,000 $348,000 127,500 Net Operating Income