Gabba Catering Currently Sells Hot Dogs

Gabba Catering currently sells hot dogs.During a typical month,the stand reports a profit of $9000 with sales of $50 000,fixed costs of $21 000,and variable costs of $0.64 per hot dog.
Next year,the company plans to start selling nachos for $3 per unit.Nachos will have a variable cost of $0.72 and new equipment and personnel to produce nachos will increase monthly fixed costs by $8808.Initial sales of nachos should total 5000 units.Most of the nacho sales are anticipated to come from current hot dog purchasers,therefore,monthly sales of hot dogs are expected to decline to $20 000.
After the first year of nacho sales,the company CEO believes that hot dog sales will increase to $33 750 a month and nacho sales will increase to 7500 units a month.
Required:
a.Determine the monthly break-even sales in dollars before adding nachos.
b.Determine the monthly break-even sales during the first year of nachos sales,assuming a constant sales mix of 1 hotdog and 2 units of nachos.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Correct Answer:

Verified

a.Contribution margin = Fixed costs + Pr...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

View Full Answer For Free