The No Doze Cafe coffee shop sells 50 different types of coffee to its patrons. It costs $4 for a cup of coffee. Each day it sells on average 500 cups of coffee. On the weekends it sells closer to 1000 cups of coffee. Here is a breakdown of the shop’s expenses per cup of coffee: Variable Costs Item Amount Coffee/Water $1.50 Paper Cup $0.30 Sweetener $0.20 Fixed Costs Item Amount Labor $100/day per employee Store Space Rent $800/month If the shop sells 1000 cups on Saturday and there are 3 employees working, what is Saturday’s contribution margin?

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SerenaBochenek SerenaBochenek · Answer 1 · 2020-11-24T06:31:45+01:00

Answer:

The right response is "$2". A further explanation is given below.

Explanation:

Here Price per cup will be:

= $4 and Variable cost per cup

= cost of coffee + cost of sweetener + cost of paper cup

= [tex]1.5 + 0.3 + 0.2[/tex]

= [tex]2[/tex] ($)

The contribution of margin will be:

⇒ [tex]Contribution \ margin = Price - Variable \ cost[/tex]

On putting the values, we get

⇒ [tex]=4-2[/tex]

⇒ [tex]=2[/tex] ($)