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What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix would be 43 percent chicken and 57 percent fish at the break-even point, compute the break-even volume using weighted-average contribution margin. c. If the product sales mix were to change to four chicken tacos for each fish taco, what would be the new break-even volume?

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Parrain

Answer:

a. Anticipated level of profit.

Profit = Contribution margin of Chicken + Contribution Margin of Fish - Fixed costs

Contribution margin of Chicken

= (Selling - Variable costs) * Units sold

= ( 3.9 - 1.95) * 209,000

= $407,550‬

Contribution Margin of Fish

= (Selling - Variable costs) * Units sold

= ( 5 - 2.5 ) * 305,000

= $762,500‬

Profit = 407,550‬ + 762,500‬ - 111,000

Profit = $‭1,059,050‬

b. Break-even using weighted-average contribution margin.

Breakeven point = Fixed Cost/ Weighted Contribution margin

Weighted contribution margin

= (Proportion of chicken * Contribution margin of chicken) + (Proportion of fish * Contribution margin of fish)

= ( 43% * (3.9-1.95)) + ( 57% * ( 5 - 2.5 ))

= $2.2635‬

Breakeven point = 111,000 / 2.2635‬

= 49,039 units

c. Sales mix changes to four chicken tacos for each fish taco.

That means 0.8 chickens and 0.2 fish.

= (Proportion of chicken * Contribution margin of chicken) + (Proportion of fish * Contribution margin of fish)

= ( 80% * (3.9-1.95)) + ( 20% * ( 5 - 2.5 ))

= $2.06

Breakeven point = 111,000 / 2.06

= 53,883 units

Chicken = 80% * 53,883

= 43,106 units

Fish = 53,883 - 43,106

= 10,777 units

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