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Melinda and Morris sell soft drinks at basketball tournaments. They charge $2 per can. The cost...

Melinda and Morris sell soft drinks at basketball tournaments. They charge $2 per can. The cost to purchase the soft drinks is $0.60 per can. They estimate that they can sell at least 200 cans at each game.

  1. (a)To break even, what is the most that they can pay in fixed costs?

  2. (b)If they sell 300 cans during a game, how much can they pay in fixed costs?

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Answer #1

Sale price per can-S2 Per can Cost per can$0.60 Per can Contribution margin- Sale price - Variable cost - S2 Per Can S0.60 Per Can - S1.40 Per Can Number of units sold - 200 Cans a) Break even point in units - Fixed costs / Contribution margin per unit 200 Cans Fixed costs $1.40 Per Can Fixed costs 200 Cans * S 1.40 Per can -$280 Ans : Maximum fixed costs can afford to become break even = $280 b) If number of units sold300 Cans Fixed costs 300 Cans$1.40 Per Can $420

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