Question

The Salsa Shack sells three tacos for every two burritos. A taco sells for $2.00 and has a variable cost of $1.00. A burrito sells for $5 and has a variable cost of $2.25. The Salsa Shack has fixed costs of $27,200. A. What is the weighted-average contribution margin? B. How many of each product does The Salsa Shack need to sell in order to breakeven (ie - how many tacos and how many burritos must be sold to breakeven)

Answer 1

	Taco	Burritos
Sales mix	3	2
PERCENTAGE Sales mix	60%	40%
Selling price	2	5
Variable cost	1	2.25
Contribution	1	2.75
Weighted contribution = 1 * 60% + 2.75*40%
1.7
Break even = Fixed cost / Weighted contribution margin per unit
=27200/1.7
16000	Units
Units of Taco	9600	(16000*60%)
Units of Burritos	6400	(16000*40%)