The owner expects the selling prices, variable costs, and fixed costs to remain stable over the next year.
1. Compute the number of cups that Chilly Cow must sell in a month to break even.
2. Compute the number of cups of yogurt that Chilly Cow will sell when it breaks even.
3. Chilly Cow currently generates a loss of $1,120 per month. What sales revenue is it realizing each month?
4. Continue to assume that Chilly Cow is generating a loss of $1,120 per month. Chilly Cows owner is considering the purchase of advertising that will generate an additional $3,000 per month in revenue. Compute the most that the owner should be willing to pay for this advertising.
5. Ignore the advertising mentioned in question 26. Instead assume that Chilly Cows only ice cream competitor closed in February. The owner believes its product mix will change: Chill Cow will now sell three cups of ice cream for every cup of frozen yogurt. Compute the weighted average contribution margin that will be generated by this new sales mix.
6. Assume that because there are no new competitors, Chilly Cow can increase its selling price for ice cream and not affect its sales mix. The sales mix will remain at three cups of ice cream for every cup of frozen yogurt. What price will it need to set for ice cream in order to generate a weighted average contribution margin of $1.40 per cup?
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