#1 and #2

wanted to know the steps to gets the answers for #1

1. Suppose that Red Jett Sweets, on average, sells one beverage for each three aupcakes sold. In this situe- tion, an average typical) sale would be 3 cupcakes x $2.75 plus 1 beverage x $1.35, for a total sale of $9.60. if the variable cost of one cupcake is $1.34, and the variable cost of one beverage is $0.52, how many cupcakes and beverages must be sold to attain breakeven? 2. How would you calculate breakeven for a restaurant that sells 50 different thems, each with a different price and ditferent variable cost? Key points Fixed costs plus variable costs equal your total cost. Fixed costs remain constant in total, but variable costs increase as output increases and de- crease if output decreases The more cupcakes that Red Jett Sweets sell, the less its fixed cost per item becomes. In our example, at one cupcake, the entire fixed cost of $6.260 is applied to that one item. At 1,000 cupcakes, the fixed cost per item is only $6.26. This truism is called economy of scale. ece The You have certainly encountered these concepts before. The point a which gross revenue exactly equals total costs is alled the break-even point. At breakeven you neither make any money nor lose any. In the example above, Red Jett Sweets must sell 4440 cupcakes to break even. These relation- ships are shown graphically in Figure 13.11. Of course, no one goes into business to break even. For bre this reason, the concept has been expanded into cost-volume-profit analysis (CVP). Red Jett Sweets The has determined that the best price for their cupcakes is $2.75. Suppose management would like to earn equ $100,000 per year. How many cupcakes must Red Jett Sweets sell to make a $100,000 profit? There must be enough sales to cover all Red Jett Sweets' costs, then to produce $100,000 in profit Total Variable Cost Quantity x $2.75Quantity X $1.344 6,260 x 12 Total Revenue Total Annual Fixed CostDesired Profit +$100,000 If you solve this equation as in Figure 13.10, you will find that Red Jett Sweets must sell 75,362 cup- cakes to earn an annual profit of $100,000. These relationships are shown graphically in Figure 13.11 This formula can easily be expanded to account for income taxes. If Red Jett Sweets's management wants to have $100,000 after tax, and the firm's tax rate is 25 percent, then the formula would become: Calculate Sales to Make $100,000 AFTER Taxes Total Revenue Total Variable Cost Total Annual Fixed Cost Desired Profit Quantity x $2.75- Quantity X$1344 + 6,260 >12 + $100,00/(1-25) Revenue $207.246 Total Revenue Profit $100,000 Point $12,210 Variable Costs Total Costs 107,246 Fxed Costs 4,440 cupcakes 75,362 cupcakes