REQUIRED:
• A. What is the total cost function for Coffee Cart Supreme?
• B. What is the tax rate for Coffee Cart Supreme?
• C. Calculate the amount of sales needed to reach a target after–tax profit of $1,500.
• D. What was Coffee Cart Supreme’s degree of operating leverage last month?
• E. What was Coffee Cart Supreme’s margin of safety in revenue last month?
• F. What was Coffee Cart Supreme’s margin of safety percentage last month?
• G. Suppose next month’s actual revenues are $8,000 and pretax profit is $2,000. Would actual costs be higher or lower than
expected?
• H. Coffee costs are volatile because worldwide coffee production varies from year to year. Explain how this volatility affects the
quality of the cost function for Coffee Cart Supreme.
