Multiproduct break-even analysis is often viewed differently when actually applied in prac¬ tice. You are to visit a local fast-food restaurant and count the number of items on the menu. To apply multiproduct break-even analysis to the restaurant, similar menu items must often be fit into groups. A reasonable approach is to classify menu items into approximately five groups. We then estimate average selling price and average variable cost to compute average contribution margin. {Hint: For fast-food res¬ taurants, the highest contribution margin is with its beverages, at about 90%.)

Required 1. Prepare a one-year multiproduct break-even analysis for the restaurant you visit. Begin by establishing groups. Next, estimate each group’s volume and contribution margin. These estimates are necessary to compute each group’s contribution margin. Assume that annual fixed costs in total are $500,000 per year. (Hint: You must develop your own estimates on volume and contribution margin for each group to obtain the break-even point and sales.)
2. Prepare a one-page report on the results of your analysis. Comment on the volume of sales necessary to break even at a fast-food restaurant.