Joyce Bluhm is the owner of Best Burger in a small tourist town. There are three specialty burgers on Best Burger's menu (price per burger in brackets); the Best Bacon Burger ($8.80), the Best Double Cheese Burger ($8.20), and the Best Thick Beef Burger ($9.20). Joyce personally inspects each burger and ensures that they are served heaping with toppings to meet customer expectations for an experience they cannot find at other restaurants.

The Best Burger restaurant closes in the winter months when the number of tourists visiting town decreases significantly. Joyce would like to know the minimum number of burgers she needs to sell in order to break even. She intends to use this information to help her determine how long she should continue to operate the restaurant into the fall season. The common fixed costs shown below can be avoided if Joyce closes the restaurant; other fixed costs such as property taxes cannot be avoided and are therefore excluded from the analysis below. Below are the partial financial results of August, the most recent month of operations.

Best Bacon Burger Best Double Cheese Burger Best Thick Beef Burger Total

Sales $6,336 $11,808 $19,872 $38,016

Variable expenses:

Bacon 828 - - 828

Ground beef 1,368 2,736 9,288 13,392

Cheese - 648 - 648

Buns 86 173 259 518

Other 252 504 756 1,512

Total variable cost $2,534 $ 4,061 $10,303 $16,898

Contribution margin $3,802 $ 7,747 $ 9,569 $21,118

Common fixed expenses 8,700

Operating income $12,418

Required:

1.Calculate the contribution margin for each burger sold at the Best Burger restaurant.

2.Determine the break-even point in units (round to whole units) required for Joyce to cover all fixed costs, assuming the current sales mix and costs do not change. A break-even income statement need to be prepared.

3.Determine the break-even point in sales dollars.

4.Calculate Best Burger's degree of operating leverage (DOL).

The following are Best Burgers' expected volume of burger sales: September, 3,500; October, 3,000; November, 2,250; December, 1,750. Assuming the same product mix and the same common fixed expenses as August, and that Joyce requires a profit of at least $5,000, when should Joyce close the restaurant for the season?