The Richardson C ompany specializes in preparing tasty main courses that are frozen and shipped to finer restaurants in the Miami area. When a diner orders the item, the restaurant heats and serves it. The budget data for 2018 are:
Product
Chicken Cordon Bleu Veal Marsala
Selling price to restaurants $18 $20
Variable expenses 10 14
Contribution margin $8 $6
Number of units 300,000 400,000
The items are prepared in the same kitchens, delivered in the same trucks, and so forth. Therefore, the fixed costs of $1,500,000 are unaffected by the specific products.
a)Compute the expected operating income for 2018.
b) Compute the break-even point in sales dollars, assuming that the planned sales mix is maintained.
1.Expected operating income for 2018=Sales-Variable expenses-fixed expenses
Chicken Cordon Bleu Veal Marsala
=[300000*(18-10)]=2400000 =[400000*(20-14)]=2400000
As fixed cost is same for both the products it will not be allocated individually.
Total operating income=2400000+2400000-1500000
=3300000
B.
| BEP in dollars = |
Total fixed costs |
|
Weighted average CM ratio |
Chicken Cordon Bleu Veal Marsala
Contribution margin per unit 8 6
Contribution margin ratio=Contribution margin/Sale /price
=8/18*100 =6/20*100
=44.44% =30%
Weighted Average CM ratio
Weight as per sales unit 300000 400000
Weighted Average CM ratio =44.44*3/7 =30*4/7
=19.05 =17.142
Total Weighted Average CM ratio =19.05+17.142
=36.18
BEP in dollars=1500000/36.18%
=$4145936
Get Answers For Free
Most questions answered within 1 hours.