Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Rosevile Brewing Company (RBC). Brewpubs provide two products to customers--food 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 Bet sales Tood sales Other sales Total sales Less cost of sales Gross margin Les marketing and administrative expenses Operating profit 5 752,400 140.500 392.100 52,090,000 542.35 $1,547,665 1. 15.000 # 393,145 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 $140,000? To make $460,000? Is the product mix reasonable? (Beer tends to have a higher contribution margin ratio than food, and therefore product me 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. $752,400 940,500 397.100 $2,090,000 $112,860 310, 365 119.130 480,700 62,700 83,600 41.000 Sales Beer sales (36% of total sales) Food sales (451 of total sales) Other sales (198 of total sales) Total sales Variable Costa Beer (158 of beer sales) Pood (331 of food sales) Other (30# of other sales) Nages of employees (231 of sales) Supplies (31 of sales) Utilities (49 of wales) other credit card, nise. (21 of sales) Total variable cost. Contribution margin Fixed Costa Salaries manager, chef, brewer Maintenance Advertising Other cleaning. , mise Insurance and accounting Property taxes Depreciation Debt service interest on debt) Total fixed cost Operating profit $1,211,155 $ 878,845 $136,000 25.000 18,000 33.000 34,000 20,000 89,000 130.000 $ 485,000 $393,845 PEOLE 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 $140,000 $460,000? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the break-even point in sales dollars for RBC? (Round Intermediate calculations to 3 decimal places and your final answer to the nearest whole dollar) Brak even point FA Required B >
