QUESTION TWO

INFORMATION:

Bean Coffee, a local coffee shop, is considering expanding its operations by opening a new branch. The owners want to

ensure that the new branch will be profitable and are seeking advice on conducting a break$-$even analysis.

Bean Coffee estimates the following for the new branch:

Fixed Costs: R$50,000$ per month

Variable Costs per Coffee Sold: R$5$

Selling Price per Coffee: R$20$

The owners anticipate selling an average of $2,000$ coffees per month at the new branch.

REQUIRED:

$2\mathrm{.}1$ Calculate the break$-$even point in terms of the number of coffees Bean Coffee needs to sell each month to

cover its fixed and variable costs.

$2\mathrm{.}2$ Discuss what does the break$-$even point signify for Bean Coffee?

$2\mathrm{.}3$ If Bean Coffee wants to make a monthly profit of R$10,000,$ how many coffees do they need to sell?

$2\mathrm{.}4$ Discuss the importance of break$-$even analysis for businesses like Bean Coffee.

$2\mathrm{.}5$ Suggest some strategies Bean Coffee can implement to lower its break$-$even point.