In: Accounting
Congratulations, you have just purchased a gourmet coffee shop on Rush Street for $100,000. The current prices are $1.50 for a cup of coffee and 50 cents for a donut. You sell 1 donut for every 3 cups of coffee. While you make a number of gourmet drinks at higher prices as well, these two items are your biggest sellers. Your costs are as follows:
Coffee per cup 15 cents
Sugar and cream per cup 5 cents
Cinnamon and chocolate per cup 2 cents
Cups and lids 3 cents, Donuts cost 25 cents
Help 2 people normally, each paid $8 per hour
Extra help on busy weekends 2 people
Your rent is $3000 / month
Utilities are $200 / month
Advertising $100 / month
There are four other coffee shops within walking distance. Starbucks is just around the corner. The past owners sold 300 cups of coffee per day during the week and 500 cups on weekends. Your store is open 10 hours a day every day.
1) What is the cost of each cup of coffee? Provide lots of details.
2) Based on the above, what business strategy would seem appropriate? Convince your banker that you know the business and the area.
Please find the assumption as a month is taken as 30 days with 8 weekend days. Do revert for any clarification. Cheers