An Espresso Coffee Bar is currently doing $600,000 a year in sales revenue. Beverage (mostly coffee) and
Question:
An Espresso Coffee Bar is currently doing $600,000 a year in sales revenue. Beverage (mostly coffee) and Food Cost (pastries, sandwiches, etc.) is 28% and other variable costs at this level of sales revenue are 38%. Fixed costs are $175,000.
The Espresso Coffee Bar has a gross profit of $432,000 ($600,000 x 0.72). After deducting the fixed costs of $175,000 from the gross profit, the Espresso Coffee Bar has a net profit of $257,000 ($432,000 - $175,000).
a. What is the annual operating income (before tax)? b. What is the breakeven sales level in dollars? c. The owner wants to increase the manager's salary by $12,000 a year. By how much will sales revenue have to increase to provide this ad-ditional salary and maintain the current level of operating income?(Any added sales revenue will come from increasing seat turnover by increasing customer service.) d. what does Contribution Margin mean?
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer