Matt Schmidt has spent 750$ for a tent, table, and chairs for his lemonade stand. He figures he can sell a glass of lemonade in the park to little league players for $0.75. His cost per drink is estimated to be $0.20. He also has to cover napkins, cups, and other variable costs estimated to be $0.05 per glass of lemonade sold.
He will open his business on June 1 and be open five days each week for the summer months of June-august. He will pay his parents $2 each day to transport him and his materials to and from the park.
Matt projects daily sales of 100 glasses of lemonade.
- What is the contribution margin?
- What is his breakeven point given that he wants to cover all of his costs?
- What day of the summer will he breakeven?