Business Studies

NAME: GRADE: 12

Marks: __ / 25
DATE:

Coffee Shop
John and Nadine have decided to open a Coffee shop. They understand the importance of
market research. After interviewing two coffee shop owners they were able to gather the
following data on the estimated costs of a coffee shop. John has studied Business in school and
thinks the whole table can be completed with the help of given information.

ANNUAL TOTAL ANNUAL TOTAL TOTAL Profit Contribution

Sales VARIABLE FIXED COSTS REVENUE
OUTPUT COSTS COSTS
OF TAKE-
AWAY
MEALS

0 0 90,000 90,000 0 -90,000 0

16 000 64 000 90,000 154,000 112,000 -42,000 48,000

32 000 128,000 90 000 218,000 224,000 6,000 96000

48 000 192000 90,000 282,000 336,000 54,000 144,000

64 000 256000 90,000 346,000 448,000 102,000 192,000

80 000 320,000 90,000 410,000 560,000 150,000 240,000

Figure 1.1
A. Calculate variable cost per meal. [2]

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64000/16,000 = 4
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B. Calculate Sale Price Per meal [2]

560,000 / 80,000 = 7
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C. Calculate Contribution per meal. [2]

Selling price per meal - Variable Cost per meal
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7 - 4 = 3 per meal
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D. Complete the table given above. (Figure 1.1) [6]

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E. There is a special order for a birthday party. The buyer has proposed a selling price of
$5 per meal. Considering the contribution per meal calculated in C, should the order be
accepted? [2]
Yes the order should be accepted because the contribution
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is positive. (3)
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F. Because of inflation, the owners expect Variable Costs to increase to $ 6 per meal and
the Fixed Costs to increase to $ 100 000 a year. Calculate the profit if they expect to sell
50,000 meals with an increased the Selling Price to $ 8 per meal. [4]
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Sales Revenue = 8 X 50,000 = 400,000
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Variable Costs = 6 X 50,000 = 300,000
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Total Cost = 300,000 + 100,000 = 400,000
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Profit = Sales Revenue - Total Costs

= 400,000 - 400,000
= 0
 G. Using the information from ‘Part F’, Calculate the new break-even point in units. [3]

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100,000 / (8-6)
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50,000 units
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H. Based on the information in Part F, prepare a Break-even Graph, identify break-

even point on the graph and Label the graph completely. [4]

400,000 Total Cost Sales Revenue

350,000

300,000

250,000

200,000

150,000

100,000 Fixed cost

50,000

10,000 20,000 30,000 40,000 50,000

Break even point

In this case the number of units sold are = Break-even point.