Rio coffee shoppe sells two coffee drinks, a regular coffee and a latte. the two drinks have the following prices and cost characteristics: regular coffee latte sales price (per cup) $ 1.50 $ 2.50 variable costs (per cup) 0.70 1.30 the monthly fixed costs at rio are $6,720. based on experience, the manager at rio knows that the store sells 60 percent regular coffee and 40 percent lattes. required: how many cups of regular coffee and lattes must rio sell every month to break even?

3,919 regular

2,613 latte

Explanation:

To know the break even first we will need to know the contribution mix:

First, we calculate the contribution margin per product

Regular:

1.50 - 0.70 = 0.8

Coffe Latte:

2.50 - 1.30 = 1.20

Second, we will multiply contrbution with the sales weight, for each product and add them together:

0.8* 60% = 0.48

1.20 * 40% = 0.48

Contribution Mix 0.96

Now we proceed with the BEP:

6270/0.96 = 6531.25 = BEP

now we convert this value in types of coffe multiplying by the sale weight

6,531.25 x 60% = 3,918.75 regular

6,531.25 x 40% = 2,612.5 latte

We can do half a coffe so we round up in both cases.