Break -Even. a sandwich shop has been doing business for 10 years in Pinecrest.
ID: 2800696 • Letter: B
Question
Break -Even. a sandwich shop has been doing business for 10 years in Pinecrest. The shop currently operates out of a building that is paid for. The variable overhead expenses are 10% of sales each sandwich. Each sandwich has a food cost of $1 and sells for $5 each, the sandwiches has an overhead cost of 10% of the sales price. Everything will stay the same at the new shop in The Falls, costs, sales price, overhead. The only new cost is the monthly rent of $6000 What is the monthly break-even of the new shop The Falls in units and B) in dollars?Explanation / Answer
Contribution margin per sandwich = Selling price per sandwich - Unit Variable Expenses = $ 5 - $ ( 1 + 0.50) = $ 3.50
Break-even sales in units ( monthly) = Monthtly Fixed Cost / Unit Contribution Margin = $ 6,000 / $ 3.50 = 1,714.29 sandwiches.
Break-even dollar sales = Fixed Cost / Contribution Margin Ratio = $ 6,000 / $ 3.50 x $ 5.00 = $ 8,571.43