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There is a new pub, Jenny's Pub, in Knoxville downtown, Tennessee. The pub sells both domestic and import beers at a contribution margin of $

There is a new pub, Jenny's Pub, in Knoxville downtown, Tennessee. The pub sells both
domestic and import beers at a contribution margin of $1.50 each. The owner of the pub is
considering adding sandwiches and hamburgers to its menu as more and more customers are
asking for food in addition to drink. This will also help the owner to meet competition from other
bars nearby, some of which provide extensive menus.
The pub needs to hire a part-time cook for its new menu and the monthly wage is $3,000. The
additional fixed cost for the new menu will be $800 per month. Each sandwich will cost $0.30,
$1.50, and $0.70 for bread, meat, and other items, respectively. Each hamburger will cost $0.50,
$1.90, and $0.80 for buns, meat, and other items, respectively. The sandwiches will be sold for
$4.00 each while the hamburger will be $4.20 each. We assume that there are 30 days in a
month.
(1) If the numbers of sandwiches and hamburgers can be sold are projected to be in the
ratio of 1 to 2, what is the monthly break-even point in terms of sandwiches and
hamburgers?
(2) If the numbers of sandwiches and hamburgers can be sold are projected to be in the
ratio of 2 to 1, what is the monthly break-even point in terms of dollar amount?
(3) At the end of 3 months, the owner finds the pub has sold 5,000 sandwiches and
10,000 hamburgers. What is the operating profit per month on the extended menu?
(4) The pub owner believes at least 50 extra beers are sold daily because of the extended
menu. How does this affect the monthly operating income?
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