Question: Use these baseline assumptions unless an entry introduces new information: Products (baseline menu): Coffee (12 oz), Pastry, Chai Latte (16 oz), Bottled Water. Selling prices:
Use these baseline assumptions unless an entry introduces new information: Products (baseline menu): Coffee (12 oz), Pastry, Chai Latte (16 oz), Bottled Water. Selling prices: Coffee $5.00; Pastry $3.00; Chai Latte $6.00; Bottled Water $2.00. Variable costs: Coffee $1.50; Pastry $1.20; Chai $2.50; Water $0.80. Fixed costs (monthly): $3,500(permits, fuel, commissary, insurance, base labor). Sales mix (baseline): 55% coffee, 25% pastry, 15% chai, 5% water. Operating days: 25 days/month (MonFri). Collections pattern: 60% in month of sale, 40% next month. Forecasts: June 1,200 coffee; 500 pastries; 300 chai; 100 waters. July 1,500 coffee; 600 pastries; 400 chai; 150 waters. August 1,600 coffee; 650 pastries; 500 chai; 200 waters. Inventory policy: Maintain ending inventory equal to 10% of the next months coffee and chai forecasts. Beginning inventory =10% of prior months forecast. Pastries and bottled water are purchased ready-to-sell and excluded from production schedule. Entry 1 CVP Analysis & Target Profit (Ch.5) Purpose: Confirm whether current prices and mix support a profit goal of $2,000/month. Tasks: 1) Compute CM/unit for each product (coffee, pastry, chai, water).2) Compute weightedaverage CM/unit using baseline mix (55/25/15/5).3) Compute breakeven in total units. 4) Compute required total units for $2,000 monthly profit. 5) Recommend pricing/volume actions and operational implications.
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