Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Multiple-Product Break-Even Analysis Currently, Corner Lunch Counter sells only Super Burgers for $5.50 each. During a typical month, the Counter reports a profit of $12,125

Multiple-Product Break-Even Analysis Currently, Corner Lunch Counter sells only Super Burgers for $5.50 each. During a typical month, the Counter reports a profit of $12,125 with sales of $68,750 and fixed costs of $36,000. Management is considering the introduction of a new Super Chicken Sandwich that will sell for $7.00 and have variable costs of $2.50. The addition of the Super Chicken Sandwich will require hiring additional personnel and renting additional equipment. These actions will increase monthly fixed costs by $5,400.

In the short run, management predicts that Super Chicken sales will average 7,500 sandwiches per month. However, almost all short-run sales of Super Chickens will come from regular customers who switch from Super Burgers to Super Chickens. Consequently, management predicts monthly sales revenue from Super Burgers will decline $27,500 ( 5,000 units). In the long run, management predicts that Super Chicken sales will increase to 9,000 sandwiches per month and that Super Burger sales will increase to 16,000 burgers per month. Find:

  1. The current monthly break-even point in sales dollars. Round your answer up to the nearest sales dollar.
  2. The short-run monthly profit subsequent to the introduction of Super Chickens.
  3. The short-run break-even point in sales dollars subsequent to the introduction of Super Chickens. Round the contribution ratio to two decimal places. Round your final answer to the nearest whole dollar.
  4. The long-run monthly profit subsequent to the introduction of Super Chickens.
  5. The break-even point in sales dollars subsequent to the introduction of Super Chickens.Round the contribution ratio to three decimal places. Round your final answer to the nearest whole dollar.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Financial Accounting

Authors: Anne Marie Ward, Andrew Thomas

9th Edition

1526803003, 978-1526803009

More Books

Students also viewed these Accounting questions

Question

Differentiate 3sin(9x+2x)

Answered: 1 week ago

Question

Compute the derivative f(x)=(x-a)(x-b)

Answered: 1 week ago

Question

Engage everyone in the dialogue

Answered: 1 week ago