2- 60 Sales- Mix Analysis Study Appendix 2A. The Rocky Mountain Catering Company

Question

2- 60 Sales- Mix Analysis Study Appendix 2A. The Rocky Mountain Catering Company specializes in preparing Mexican dinners that it freezes and ships to restaurants in the Denver area. When a diner orders an item, the restaurant heats and serves it. The budget data for 20X5 are

                                                                                              Product

                                                               Chicken Tacos                 Beef Enchiladas

Selling price to restaurants                        $ 5                                        $ 7

Variable expenses                                             3                                            4

Contribution margin                                      $ 2                                        $ 3

Number of units                                  250,000                                125,000

The company prepares the items in the same kitchens, delivers them in the same trucks, and so forth. Therefore, decisions about the individual products do not affect the fixed costs of $ 735,000.

1. Compute the planned net income for 20X5.

2. Compute the break- even point in units, assuming that the company maintains its planned sales mix. 3. Compute the break- even point in units if the company sells only tacos and if it sells only enchiladas.

4. Suppose the company sells 78,750 units of enchiladas and 236,250 units of tacos, for a total of 315,000 units. Compute the net income. Compute the new break- even point with this new sales mix. What is the major lesson of this problem?

Explanation / Answer

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