Question

Break-Even with Multiple Products

We Scream For Ice Cream sells ice cream in three flavors: Chocolate, Strawberry, and Vanilla. It sold 28,000 gallons last year, but it is still losing money. For every five gallons of ice cream sold, one gallon is Strawberry and the remainder is split evenly between Chocolate and Vanilla. Fixed costs for We Scream For Ice Cream are $55,056 and additional information follows:

	Chocolate	Vanilla	Strawberry
Sales price per gallon	$5.25	$5.25	$5.25
Variable cost per gallon	$2.75	$3.75	$3.95

Before answering the questions below, compute the following for each flavor:

	Chocolate	Vanilla	Strawberry
Contribution margin	Answer	Answer	Answer
Sales mix (%)	Answer	Answer	Answer
Weighted avg. CM	Answer	Answer	Answer

a. Assuming the sales mix remains constant, how many total gallons of ice cream must be sold to break even?

Answer

b. How many gallons of strawberry ice cream will be sold at the break-even point?

Answer

c. What will total revenue equal at the break-even point?

$Answer

Answer 1

Before answering the questions below, compute the following for each flavor:

	Chocolate	Vanilla	Strawberry
Contribution margin	5.25-2.75 = 2.50	5.25-3.75 = 1.50	5.25-3.95 = 1.30
Sales mix (%)	2/5	2/5	1/5
Weighted avg. CM	1	0.60	0.26

a. Assuming the sales mix remains constant, how many total gallons of ice cream must be sold to break even?

= 55056/1.86 = 29600 Gallons

b. How many gallons of strawberry ice cream will be sold at the break-even point?

29600*1/5 = 5920 Gallons

c. What will total revenue equal at the break-even point?

= 29600*5.25= $155400

answered by: anonymous