Question

1. Pete’s ice cream truck always has a lot of business in the hot summer months in Chicago. Pete sells both ice cream cones and popsicles. For every 10 ice cream cones Pete sells, he also sells 8 popsicles. His cost to rent and operate the ice cream truck is 800 per month. Pete provides you with the following information on the ice cream and popsicles:

   	Ice Cream Cone	Popsicle
   Price	$2.00	$1.25
   Variable Cost	$1.25	$0.75

   How many ice cream cones and how many popsicles does Pete need to sell each month to breakeven?

   		1067 ice creams and 1600 popsicles
   		627 ice creams and 627 popsicles
   		696 ice creams and 557 popsicles
   		1253 ice creams and 1253 popsicles

Answer 1

	Ice Cream Cone	Popsicle
Price	2.00	1.25
Less: Variable Cost	1.25	0.75
Contribution margin	0.75	0.50
Sales mix = 10:8 = 5:4
Weighted average Contribution margin	0.64	=(0.75*5/9)+(0.50*4/9)
Fixed expenses	800
/ Weighted average Contribution margin	0.64
Overall Break even point	1252
Units of ice cream cones	696	=1252*5/9
Units of popsicles	557	=1252*4/9
696 ice creams and 557 popsicles
Option C is correct