Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC). Brewpubs provide two products to customersfood from the restaurant segment and freshly brewed beer from the beer production segment. Both segments are typically in the same building, which allows customers to see the beer-brewing process. After months of research, the owners created a financial model that showed the following projections for the first year of operations. Sales Beer sales Food sales Other sales Total sales Less cost of sales Gross margin Less marketing and administrative expenses Operating profit $ 784,000 882,000 294,000 $1,960,000 448,840 $1,511,160 1,071,000 440,160 In the process of pursuing capital through private investors and financial institutions, RBC was approached with several questions. The following represents a sample of the more common questions asked: . . What is the break-even point? What sales dollars will be required to make $170,000? To make $450,000? Is the product mix reasonable? (Beer tends to have a higher contribution margin ratio than food, and therefore product mix assumptions are critical to profit projections.) . What happens to operating profit if the product mix shifts? How will changes in price affect operating profit? How much does a pint of beer cost to produce? . It became clear to the owners of RBC that the initial financial model was not adequate for answering these types of questions. After further research, RBC created another financial model that provided the following information for the first year of operations. $784,000 882,000 294,000 $1,960,000 $ 78,400 282, 240 88,200 411,600 58,800 98,000 19,600 Sales Beer sales (40% of total sales) Food sales (45% of total sales) Other sales (15% of total sales) Total sales Variable costs Beer (10% of beer sales) Food (32% of food sales) Other (30% of other sales) Wages of employees (21% of sales) Supplies (3% of sales) Utilities (5% of sales) Other: credit card, misc. (1% of sales) Total variable costs Contribution margin Fixed Costs Salaries: manager, chef, brewer Maintenance Advertising Other: cleaning, menus, misc Insurance and accounting Property taxes Depreciation Debt service interest on debt) Total fixed costs Operating profit $1,036,840 $ 923,160 $140,000 26,000 16,000 31,000 34,000 20,000 91,000 125,000 $ 483,000 $ 440,160 Required: Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b. What is the margin of safety for RBC? c. What sales dollars would be required to achieve an operating profit of $170,000? $450,000