Mission Foods produces two flavors of tacos, chicken and fish, with the followin
ID: 2493667 • Letter: M
Question
Mission Foods produces two flavors of tacos, chicken and fish, with the following characteristics:
Chicken Fish
Selling price per taco $3.40 $4.80
Variable cost per taco 1.70 2.40
Expected sales (tacos) 190,000 292,000
The total fixed costs for the company are $117,000.
(a) What is the anticipated level of profits for the expected sales volumes?
(b) Assuming that the product mix would be 39 percent chicken and 61 percent fish at the break-even point, compute the break-even volume
(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?
Explanation / Answer
Req 1 CHICKEN FISH Total Selling Price per taco 3.4 4.8 Less: variable cost per taco 1.7 2.4 Contribution margin per unit 1.7 2.4 Numbe of Tacos 190,000 292,000 Total Contribution 323000 700800 1,023,800 Less: Fixed cost 117,000 Net Operating income 906,800 Req 2: CHICKEN FISH Total Sales mix 39% 61% 100% Selling Price per taco 3.4 4.8 Less: variable cost per taco 1.7 2.4 Contribution margin per unit 1.7 2.4 Weighted sales revenue 1.326 2.928 4.254 Weighted Contribution margin 0.663 1.464 2.127 Weighted CM ratio: Weighted Contribution margin/ sales revenue *100 2.127/ 4.254 *100= 50% Break Even Volume in $: Fixed Cost / CM ratio = $ 117,000 /50% = 234,000 Req 3: CHICKEN FISH Total Sales mix 80% 20% 100% Selling Price per taco 3.4 4.8 Less: variable cost per taco 1.7 2.4 Contribution margin per unit 1.7 2.4 Weighted sales revenue 2.72 0.96 3.68 Weighted Contribution margin 1.36 0.48 1.84 Weighted CM ratio: 1.84 /3.68 *100 = 50% Break even Volume in $: Fixed cost / Weighted CM ratio = 117,000 /50% = $ 234,000