Refer to the Joe’s Coffee House information below.
Joe’s Coffee House
Joe’s Coffee House has the following information available for the month of July:
$\begin{array}{lr}
\text { Sales }(2500 \text { cups) } & \$ 7500 \
\text { Variable costs } & 3250 \
\text { Fixed costs } & 4000 \
\text { Net Income } & \$ \quad 250
\end{array}$
-If Joe's sells 500 more cups of coffee per month,net income will:

Question

Quizplus · Accepted Answer

The contribution margin per cup of coffee is $2 ($7500 sales - $3250 variable costs / 2500 cups). If Joe's sells 500 more cups of coffee, the contribution margin will increase by $1000 ($2 x 500). After deducting the fixed costs of $4000, the net income will increase by $1000 - $4000 = $600. However, the question states that the net income will increase by $250, so the correct answer is A) increase by $850.

Refer to the Joe’s Coffee House Information Below -If Joe's Sells 500 More Cups of Coffee Per Month,net