Question

Po po The R (12 u b Sheps three types of submarine sandwiches RegSub 6 Kim and the Big Boy (16" long). Data concerning the three sandwiches is provided bow ROSSINI SUB SHOP DATA FOR PRODUCTS SOLD BY COMPANY Regular King Size Selling Price S 3.00 S 5.00 5 Variable Cost Per Sandwich S 2.00 3.00 Sales Mix Percentage 50% 35% S Big Boy 8 .00 5.00 15% The shop has monthly fixed costs of $30,000. The company has a marginal tax rate of 20% REQUIRED: (1) (3) What is the Sub Shop's weighted average contribution margin based on its current sales mix? Show supporting computations. Round your answer to two decimal places. What is the Sub Shop's break even point per month in total sandwiches and for each type of sandwich that it sells? Round your answers up to the next whole unit. How many total sandwiches and sandwiches of each type would the Sub Shop have to sell per month in order to earn a before tax profit of $15,000? Round your answers up to the next whole unit. How much in sales dollars for each type of sandwich would the Sub Shop have to sell per month in order to earn an after tax profit of $8,000? Round your unit answers up to the next whole unit and your dollar answers up to the next whole dollar

Answer 1

1. What is the Sub Shop's weighted average contribution margin based on its current sales mix ? Show supporting computations. Round your answer to two decimal points.

Ans. Weighted average contribution = Weighted Average Sellling Price - Weighted average Variable Cost

or

Weighted Average Contribution = Contribution per Unit X Sales mix percentage

Product	Selling Price ($)	Variable Cost ($)	Contribution per Unit ($)	Sales mix percentage	Weighted Average Contribution ($)
Regular	3.00	2.00	1.00	50%	0.50
King Size	5.00	3.00	2.00	35%	0.70
Big Boy	8.00	5.00	3.00	15%	0.45
Weighted Average Contribution Margin	1.65

2.What is the Sub Shop's break even point per month in total sandwiches and for each type of sandwich that it sells? Round your answers up to next whole unit.

Break even point sales = Total Fixed Costs / Weighted average contribution margin

Total Fixed Cost =$30,000

Weighted average contibution margin = $1.65

Break even pint sales = $30,000/$1.65 = 18,182 Units

Product	Sales mix percentage	Calculation	Break even point sales
Regular	50%	18,182 units X 50%	9,091 Units
King Sixe	35%	18,182 units X 35%	6,364 Units
Big Boy	15%	18,182 units X 15%	2,728 Units

3. How many total sandwiches and sandwiches of each type would the sub shop have to sell per month in order to earn a before tax profit of $15,000 ? Round your answers up to the next whole unit.

A. Target Profit before tax = $15,000

Sales at target profit = ( Total Fixed Cost + Desired Profit before tax) / Weighted average contribution margin

Total Fixed Costs = $30,000

Desired Profit before tax = $15,000

sales at target profit = ($30,000 + $15,000)/$1.65

Total Sales = 27,273 Units

Product	Sales mix percentage	Calculation	Break even point sales
Regular	50%	27,273 units X 50%	13,637 Units
King Sixe	35%	27,273 units X 35%	9,546 Units
Big Boy	15%	27,273 units X 15%	4,091 Units

4.How much in sales dollars for each type of sandwich would the sub shop have to sell per month in order to earn an after tax profit of $8,000? Round your unit answers up to the next whole unit and your dollar answers up to the next whole dollar.

Total desired profit after tax = $8,000

Desired profit before tax = $8,000 / (100 - tax rate) = $8,000 / 80% = $10,000

Sales at target profit = ( Total Fixed Cost + Desired Profit before tax) / Weighted average contribution margin

Total Fixed Costs = $30,000

Desired Profit before tax = $10,000

sales at target profit = ($30,000 + $10,000)/$1.65 = 24,243 Units

Product	Sales mix percentage	Calculation	Break even point sales	Selling Price per unit ($)	Sales in dollars
Regular	50%	24,243 units X 50%	12,122 Units	3.00	36,366
King Sixe	35%	24,243 units X 35%	8,486 Units	5.00	42,430
Big Boy	15%	24,243 units X 15%	3,637 Units	8.00	29,096
Total Sales	107,892