Clam Clam Restaurant offers two types of all-you-can eat options: regular and ul
ID: 2416863 • Letter: C
Question
Clam Clam Restaurant offers two types of all-you-can eat options: regular and ultimate. Ultimate provides more choices than the regular menu. The restaurant incurs fixed costs of $9,000 per month. Its planned sales mix in units is 33% regular and 67% ultimate. The following table indicates the selling price and variable costs for each option.
Do not enter dollar signs or commas in the input boxes.
Round your answers up to the nearest whole number.
How many units of each of the regular and ultimate options need to be sold each month for the company to break-even, assuming the planned sales mix is maintained.
Break-even point Regular: Answer
Break-even point Ultimate: Answer
Explanation / Answer
Break-even is the point of zero loss or profit. At break-even point, the revenues of the business are equal its total costs and its contribution margin equals its total fixed costs
Assumptions
Regular = 9000 x 33/100 = 2970
Ultimate = 9000 x 67 / 100 = 6030
The formula to calculate break even unit is
Break-even Sales Units =FC /p – v
Where
FC = Fixed cost
P = Selling price
V = Variable cost
Calculation of break -even point of regular by putting values in above formula
X = 2970 /22-11
= 2970/11
= 270 units
To achieve break even of regular 270 units have to be sold
Calculation of break -even point of ultimate by putting values in above formula
X= 6030 /31-14
= 6030 / 17
= 355 rounding off
To achieve break even of ultimate 355 units have to be sold