Question
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:
- The current monthly break-even point in sales dollars. Round your answer up to the nearest sales dollar.
- The short-run monthly profit subsequent to the introduction of Super Chickens.
- 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.
- The long-run monthly profit subsequent to the introduction of Super Chickens.
- 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.
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