Miguel\'s Catering specializes in preparing Mexican dinners that it freezes and
ID: 2417717 • Letter: M
Question
Miguel's Catering specializes in preparing Mexican dinners that it freezes and ships to restaurants in the Seattle area. When a diner orders an item, the restaurant heats and serves it. The 2016 budget data appear below: Product Chicken Tacos Beef Enchiladas Selling price to restaurants $5 $7 Variable expenses $3 $4 Contribution margin $2 $3 Number of units 250,000 125,000 The company prepares the items in the same kitchens, delivers them in the same trucks, etc. Therefore, decisions about the individual products do not affect the fixed costs of $715,015. REQUIRED: 1. Compute the planned net income for 2016. 2. Compute the break-even point in units, assuming that the company maintains its planned sales mix. Identify # of tacos and # of enchiladas. 3. Compute the break-even point in $$ if the company sells only tacos and if it sells only enchiladas. 4. Suppose the company sells 78,750 units of enchiladas and 236,250 units of tacos, for a total of 315,000 units. Compute the new break-even point with this new sales mix. Miguel's Catering specializes in preparing Mexican dinners that it freezes and ships to restaurants in the Seattle area. When a diner orders an item, the restaurant heats and serves it. The 2016 budget data appear below: Product Chicken Tacos Beef Enchiladas Selling price to restaurants $5 $7 Variable expenses $3 $4 Contribution margin $2 $3 Number of units 250,000 125,000 The company prepares the items in the same kitchens, delivers them in the same trucks, etc. Therefore, decisions about the individual products do not affect the fixed costs of $715,015. REQUIRED: 1. Compute the planned net income for 2016. 2. Compute the break-even point in units, assuming that the company maintains its planned sales mix. Identify # of tacos and # of enchiladas. 3. Compute the break-even point in $$ if the company sells only tacos and if it sells only enchiladas. 4. Suppose the company sells 78,750 units of enchiladas and 236,250 units of tacos, for a total of 315,000 units. Compute the new break-even point with this new sales mix.Explanation / Answer
1) Net Income= (No. of units* contribution margin)- Fixed Cost
= (250,000*2 + 125,000*3) - 715,015= 159985 $
2) Break Even Sales Unit= Fixed Cost/(Price per unit- variable cost per unit)
Company sells tacos and beef in the ratio of 2:1
let tacos breakeven sales be 2x and beef be 1x
Contribution Margin in this ratio will be= (2*2 + 3*1)/3= 2.3333
Breakeven Sales= 715015/2.3333= 306436 units
tacos= (2/3)*306436= 204291 units
Enchiladas= (1/3)*306436= 102145 units
3) if only tacos
Breakeven Sales= 715015/2= 357508 units
if only Enchiladas
Breakeven Sales= 715015/3= 238339 units
4) Enchiladas= 78750
Tacos= 236,250
New mix= tacos/Enchiladas= 236250/78750= 3/1
Let breakeven tacos be 3x and Enchiladas be 1x
Contribution Margin= (3*2+1*3)/4= 2.25
Breakeven sales= 715015/2.25= 317785 units
tacos= (3/4)*317785= 238339 units
Enchiladas= (1/4)*317785= 79446 units