The Coffee Palace just had its third business anniversary. A lice Cornwell, the company ’s owner, has recently become concerned. Early in the year, she increased her prices to bring in more revenue, adding $0.25 per cup to the regular and decaffeinated coffees she sells and reducing the price of novelty coffees to increase demand for them. Now she is busier than ever, but the sales volume of each category has changed, as suggested in the following table.

A lice is worried because a lot more labor goes into making the novelty drinks than simply pouring a cup of regular coffee. Specifically, materials to make specialty coffees average $1.25 a cup, while the cost for materials for regular coffee (the cup, a lid, and the coffee itself) is only

$0.50. Labor for the novelty drinks is three minutes at $10 per hour, while labor for regular coffee drinks is only one minute. Learning that you are taking a course at college that deals specifically with trends in costs and profits, Alice enlists your help in exchange for free coffee (regular) for the year. To help Alice, you do the following:

a. Calculate the total direct costs (labor and materials) for each type of product Alice makes. Your table should look like:

b. Complete a table that determines the profit made per type of product sold by Alice. It should look like this:

Do this for both years of data you have. You should end up with two tables.

c. With profit per cup in hand, you can now calculate how much profit Alice makes for each different type of product by year. This table should look like:

Once again, calculate these numbers for two years.

d. Now do a trend analysis for profitability over the two years. Your table should look like this:

e. Now determine how much sales volume has changed. Your table should look like this:

f. Using all of this data, draft a one- to two-paragraph memo to Alice explaining what is happening and making recommendations to help her plan the next year.

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Current Price Last Year's Current Last Year's Product Type Regular coffee in $ Price in $ Volume Volume S1.75 $1.50 4,500 8,000 Decaffeinated coffee S1.75 $1.50 4,000 5,800 Flavored coffees S2.00 $1.75 4,000 6,000 Cappuccino $3.00 $3.25 3,000 2,000 Mochaccino $3.00 $3.25 2,500 1,800 Iced Cappuccino $3.25 $3.50 1,800 1,200 Iced Mochaccino $3.25 $3.25 3,500 2,600 Regular Latte $2.50 $2.75 4,500 3,000 Flavored Latte S2.75 $3.00 3,000 2,100