Question

As a prospective owner of a club known as the Red Rose, you are interested in determining the volume of sales dollars necessary for the coming year to reach the break-even point. You have decided to break down the sales for the club into four categories, the first category being beer. Your estimate of the beer sales is that 30,000 drinks will be served The selling price for each unit will average $1.50, the cost is S0.75. The second major category is meals, which you expect to be 10.000 units with an average price of $10.00 and a cost of $5.00. The third major category is desserts and wine, of which you also expect to sell 10,000 units, but with an average price of $2.50 per unit sold and a cost of $1.00 per unit The final category is lunches and inexpensive sandwiches, which you expect to total 20,000 units at an average price of $6.25 with a food cost of $3 25. Your fixed cost (ie, rent, utilities, and so on) is $1,800 per month plus $2,000 per month for a) For Red Rose, the monthly break-even point in dollars dollars per month (round your response to two decimal places) b) If Red Rose is open 30 days per month, then the expected number of meals that need to besold each daymeals per day (round your response to one decima place).

Answer 1

	Product	Volume	Weights based on volume	Selling price	Variable cost	Contribution margin	Breakeven volumes
	Beer	30,000	0.429	$1.50	$0.75	$0.75	773
	Meals	10,000	0.143	$10.00	$5.00	$5.00	258
	Wine	10,000	0.143	$2.50	$1.00	$1.50	258
	Sandwitches	20,000	0.286	$6.25	$3.25	$3.00	515
	Total	70,000	1				1,803
	Weighted average contribution margin			$2.11
	Fixed cost per month			$3,800
	Break-even volume			1,803
a)	Break-even dollars (monthly)			$7,600
b)	Expected no. of meals to be sold per day			8.6

Calculations:

A E F Product Volume Weights based on volume Selling price Variable cost Contribution margin Breakeven volumes 0.75 Beer 30000 =C3/$C$7 Meals 10000 =C4/$C$7 Wine 10000 =C5/$C$7 Sandwitches 20000 =C6/$C$7 Total =SUM(C3:C6) =SUM(D3:06) 1.5 105 2.5 6.25 =E3-F3 =E4-F4 =E5-F5 =E6-F6 =$E$12*D3 =$E$12*D4 =$E$12*D5 =$E$12*D6 =SUM(H3:H6) 3.25 Weighted average contribution margin Fixed cost per month =SUMPRODUCT(D3:06, G3:56) = (1800+2000) Break-even volume =E10/E9 12 13 14 a) 15 16 b) Break-even dollars (monthly) =SUMPRODUCT(H3:H6,E3:E6) Expected no. of meals to be sold per day =H4/30