CVP Case Study

Yummy Juices is a juice shop located in downtown Miami.  The owner is considering the purchase of a new juicer to preserve her customer base in the market.  The shop is experiencing increased difficulty in competing with juice chains such as Jumba Juice that offer customers a wider variety of specialty juices and mixes.  The shop is open weekdays only.  The cost of the new machine is $50,000.  The selling price of the new juice mixes will be $2.00 per cup, and the variable cost per cup is $.50.

Required:

1. What is the number of juices per day that must be sold to achieve break even?

2. Upon further investigation, the owner learns that the new machine requires substantial maintenance, which will increase the variable cost by $.50 per juice.  How would this information affect your answer?

3. What other factors should the owner consider before making the final decision to purchase the machine?