Question

1 Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 18,000 gallons last year. For every five gallons of ice cream sold, one gallon is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $44,275.00 and additional information follows: Sales price per gallon Variable cost per gallon Rocky Road $6.00 $2.00 Peanut Butter $6.50 $2.50 Fruity Tooty $7.75 $4.50 The breakeven sales volume in gallons for Scream For Ice Cream is O A. 11,500. OB. 8,855 O C. 4,675. OD. 3,936.

Answer 1

Solution:

Computation of weighted average contribution margin per unit
Particulars	Rocky Road	Peanut Butter	Fruity tooty	Total
Selling price per gallon	$6.00	$6.50	$7.75
Variable cost per gallon	$2.00	$2.50	$4.50
Contribution margin per gallon	$4.00	$4.00	$3.25
Sales mix	40%	40%	20%
Weighted average contribution margin per gallon	$1.60	$1.60	$0.65	$3.85

Breakeven sales volume = Fixed costs / Weighed average contribution margin per unit

= $44,275 / $3.85 = 11500 gallon

Hence option A is correct.