Question

Exercise 3-47 (Algo) Multiproduct CVP Analysis (LO 3-4)

Mission Foods produces two flavors of tacos—chicken and fish—with the following characteristics.

	Chicken			Fish
Selling price per taco	$	3.40		$	5.00
Variable cost per taco		1.70			2.50
Expected sales (tacos)		190,000			293,000

The total fixed costs for the company are $116,000.

Required:

a. What is the anticipated level of profits for the expected sales volumes?

b. Assuming that the product mix would be 43 percent chicken and 57 percent fish at the break-even point, compute the break-even volume using weighted-average contribution margin.

c. If the product sales mix were to change to four chicken tacos for each fish taco, what would be the new break-even volume?

Answer 1

	Chicken	Fish
Selling price per taco	3.40	5.00
Less: Variable cost per taco	1.70	2.50
Contribution margin per taco	1.70	2.50
1
Total Contribution margin	1055500	=(190000*1.70)+(293000*2.50)
Less: Total fixed costs	116000
Profit	939500
2
Total fixed costs	116000
Divide by weighted-average contribution margin	2.16	=(1.70*43%)+(2.50*57%)
Overall break even point	53704
Break-even volume:
Chicken	23093	=53704*43%
Fish	30612	=53704*57%
3
Total fixed costs	116000
Divide by weighted-average contribution margin	1.86	=(1.70*80%)+(2.50*20%)
Overall break even point	62366
Break-even volume:
Chicken	49893	=62366*80%
Fish	12474	=62366*20%