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Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is
Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is $300. Rachel's contribution margin is $1.50 per hot dog sold (sales price per hot dog is $5 minus variable cost per hot dog is $3.50). She has recently added individual servings of potato chips to her product offering. Each bag of potato chips has a contribution margin of $0.75 per bag (sales price per potato chips is $2 minus variable cost per hot dog is $1.25). Rachel sells 5 bags of potato chips for every 10 hot dogs. 1. What is Rachel's weighted-average contribution margin per unit? 2. How many total units must Rachel sell in a month to earn a target monthly profit of $900? 3. Of the total units needed to earn $900 of profit, how many are hot dogs and how many are bags of potato chips?
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