Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 34

Multiproduct CVP Analysis

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)	.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?

Step 1 of 5

Break-even point (units)

Break-even point is the level of operations at which the sales revenue and total costs become equal. There is no profit or no loss at break-even point sales.

In case of company having two or more products, the break-even point is to be calculated assuming the individual products as components of one overall product.