Question

Mission Foods produces two flavors of tacos-chicken and fish-with the following characteristics. $ $ Selling price per taco Variable cost per taco Expected sales (tacos) Chicken 3.10 1.55 210,000 Fish 4.80 2.40 300,000 The total fixed costs for the company are $118,000. Required: a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix would be 37 percent chicken and 63 percent fish at the break-even point, compute the break-even volume using weighted-average contribution margin. c. If the product sales mix were to change to four chicken tacos for each fish taco, what would be the new break-even volume? Complete this question by entering your answers in the tabs below. Required A Required B Required What is the anticipated level of profits for the expected sales volumes? Profit Required B >

Answer 1

(a) Calculation of anticipated level of Profits for the Expected level of sales volumes.

Particulers                                                                                                           Chicken         Fish               Total

Selling Price per taco   (A)                                                                                   3.10              4.80               -

Less : Variable cost per Taco (B)                                                                         1.55              2.40              -

Contribution per taco (C) = (A-B)                                                                          1.55               2.40

Expected Sales           (D) 210000    300000

Total Contribution (E) (C*D)    325500 720000 1045000

Less ; Fixed Cost (F)                                                                                         -    -    118000

Anticipated Profit (E-F) 927500

(B) In order to calculate Break Even Volume at given product Mix, we have to calculate the weighted average contribution margin per unit.

Particulers                                                                                                    Chicken                     Fish

(A)Contribution margin per taco (Calculated in Point (A)                                             1.55                            2.4

(B) Product Mix(Given in Qtn)                                                                                             37%                         63%

(C) A*B                                                                                                                                0.5735                   1.512

Weighted average contribution margin per unit =   0.5735+1.512

                                                                                 = 2.0855

Calculation of Break even Volume

=                                                Fixed Cost                                                                   

                                   Weighted average contribution margin per unit

=                          118000/2.0855  

=              56581

(C) Calculation of New Break even volume at new product mix of 4:1

Particulers Chicken    Fish        

(A)   Contribution margin per taco                                                                      1.55                      2.40

(B)    New product Mix                                                                                           80%                     20%

(C)   (A*B)                                                                                                               1.24                    0.48

Weighted Average contribution margin per unit = 1.2+0.48

                                                                                 = 1.72

New Break even Volume =Fixed cost/Weighted average contribution margin per unit

                                          = 118000/1.72

                                          =68604.6