Question

Sam's Sushi serves only a fixed-price lunch. The price of $8 and the variable cost of $3 per meal remain constant regardless of volume. Sam can increase lunch volume by opening and staffing additional check-out lanes. Sam has three choices, as follows. 1 Lane 2 Lanes 3 Lanes Monthly Volume Range (Number of Meals) 0-5,000 5,001-8,000 8,001-10,000 Total Fixed Costs $ 27,000 30,000 37,200 Required: a. Calculate the break-even point(s). b-1. Calculate the profit (or loss) for each alternative, assuming Sam can sell all the meals he can serve. b-2. Should Sam operate at one, two, or three lanes? Complete this question by entering your answers in the tabs below. Reg A Req B1 Req B2 Calculate the break-even point(s). 1 lane Break-Even Points meals meals meals 2 lanes 3 lanes

Answer 1

Solution: a) 1 lane 2 lanes 3 lanes Fixed cost SP VC BEP=Fixed cost/CM per unit a b c d=a/(b-c) 27000 8 3 5400|not feasible as it exceeds maximum meals of 5000 30000 8 3 6000 37200 8 3 7440 b1) 1 lane 2 lanes 3 lanes Fixed cost SP VC Meals Ib c d 27000 8 3 30000 8 31 37200 8 3 Profit/(loss) d=(b-c)*d-a 5000 -2000 8000l 10000 100001 12800 b2) Sam should operate 3 lanes. (as it highest profit)