Purple Cow operates a chain of drive-ins selling primarily ice cream products. The following information is taken from the records of a typical drive-in now operated by the company.

Average selling price of ice cream per gallon		$15.70
Number of gallons sold per month		3,100
Variable costs per gallon:
Ice cream	$4.85
Supplies (cups, cones, toppings, etc)	2.15
Total variable expenses per gallon		$7.00
Fixed costs per month:
Rent on building		$2,300.00
Utilities and upkeep		740.00
Wages, including payroll taxes		4,870.00
Managers salary, including payroll taxes but excluding any bonus		2,600.00
Other fixed expenses		1,400.00
Total fixed costs per month		$11,910.00

Based on these data, the monthly break-even sales volume is determined as follows:

$11,910 (fixed costs)	=	1,369 gallons or ($21,493)
$8.70 (contribution margin per unit)

1. Currently, all store managers have contracts calling for a bonus of 25 cents per gallon for each gallon sold beyond the break-even point. Compute the number of gallons of ice cream that must be sold per month in order to earn a monthly operating income of $10,000 (round to the next gallon).
2. To increase operating income, the company is considering the following two alternatives:
   1. Reduce the selling price by an average of $2.10 per gallon. This action is expected to increase the number of gallons sold by 20 percent. (Under this plan, the manager would be paid their salary without a bonus.)
   2. Spend $3,400 per month on advertising without any change in selling price. This action is expected to increase the number of gallons sold by 10 percent. (Under this plan, the manager would be paid their salary without a bonus).

Answer #1
Compute the number of gallons of ice cream that must be sold per month in order to earn a monthly operatng income of $10,000 (round to the nearest gallon) (Show calculations below)
Total gallons required for $10,000 sales	-
Answer #2
	A - Reduce Selling Price	B - Increase Advertising Cost
Average Selling price per gallon
Less: Variable cost per gallon
Contribution Margin per gallon
Estimated sales (in gallons)
Total Contribution margin earned
Less: Total fixed cost per month
Additional fixed cost
Projected monthly operating income
Calculation of Monthly Break-even point (in gallons):
Monthly break-even			gallons