Based on Pricing Products and Services from Marketing, answer solve this problem and MOST IMPORTANTLY, SHOW YOUR WORK!!!!

 

Problem:

 

 A group of students have decided to open a café in the public library. The library has agreed to rent them the space and equipment for the café for $500 per month. The students have decided to start small, offering brewed coffee in regular, decaf, and flavored varieties. They plan to sell only one size cup of coffee and to charge the same price for regular, decaf, or flavored coffee.

 

In addition to the rent that they pay to the library, the students must also pay utilities of $100 per month, insurance of $100 per month, and other overhead of $100 per month. Each cup of coffee costs 30¢ to brew, 10¢ for the cup, and an average of 10¢ for the milk and sugar that consumers add to their coffee. The students will also need to increase awareness of the café, and they have budgeted $200 per month in advertising costs to accomplish this.

 

1. What are our total fixed costs?
2. What is our variable cost per cup of coffee?
3. If we charge $2.00, how many cups of coffee do we need to sell each month to break even?