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	$	903,000
Food sales		1,239,000
Other sales		-42,000
Total sales	$	2,100,000
Less cost of sales		479,430
Gross margin	$	1,620,570
Less marketing and administrative expenses		1,112,000
Operating profit	$	508,570

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 $100,000? To make $560,000?

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:

Sales
Beer sales (43% of total sales)	$	903,000
Food sales (59% of total sales)		1,239,000
Other sales (-2% of total sales)		-42,000
Total sales				$	2,100,000
Variable Costs
Beer (12% of beer sales)	$	108,360
Food (31% of food sales)		384,090
Other (31% of other sales)		-13,020
Wages of employees (22% of sales)		462,000
Supplies (3% of sales)		63,000
Utilities (4% of sales)		84,000
Other: credit card, misc. (1% of sales)		21,000
Total variable costs				$	1,109,430
Contribution margin				$	990,570
Fixed Costs
Salaries: manager, chef, brewer	$	131,000
Maintenance		21,000
Advertising		17,000
Other: cleaning, menus, misc		36,000
Insurance and accounting		38,000
Property taxes		20,000
Depreciation		89,000
Debt service (interest on debt)		130,000
Total fixed costs				$	482,000
Operating profit				$	508,570

Required:

e. Perform a sensitivity analysis by answering the following questions:

1. 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.)

I'm getting $1,021,836 as break even point in sales. Showing that is incorrect.

sales	2100000
variable cost	1109430
contribution	990570
contribution in %	0.4717
fixed cost	482000
break-even sales	0.486589	1021836

2. What is the margin of safety for RBC? (Round intermediate calculations to 3 decimal places and your final answer to the nearest whole dollar.)

4. What sales dollars would be required to achieve an operating profit of $100,000? $560,000? (Round intermediate calculations to 3 decimal places and your final answers to the nearest whole dollar.)