Question

Chris's Donuts sells three types of donuts: sugar-glazed, cream-filled and giant-sized. The following table shows the sales price and variable cost for each type. Chris's incurs $280,800 a year in fixed costs. Assume that the store has a sales mix of three sugar-glazed, two cream-filled, and one giant-sized. Type Sugar-glazed Cream-filled Giant-sized Sales Price $0.78 0.94 1.10 Variable Cost $0.62 0.66 0.70 Contribution Margin $0.16 0.28 0.40 (a) X Your answer is incorrect. How many donuts of each type will be sold at the breakeven point? (Round answers to decimal places, e.g. 25,000.) Sugar-glazed 1.755.000 Cream-filled 1,002,857 Giant-sized 702,000

Answer 1

Answer:

Sales Mix = 3 of Sugar-Glazed, 2 Cream-Filled and 1 Giant-Sized

Weighted Average Contribution Margin = (3/6) * $0.16 + (2/6) * $0.28 + (1/6) * $0.40
Weighted Average Contribution Margin = $0.24

Overall Breakeven Point = Fixed Costs / Weighted Average Contribution Margin
Overall Breakeven Point = $280,800 / $0.24
Overall Breakeven Point = 1,170,000

Breakeven Point for Sugar-Glazed = (3/6) * 1,170,000
Breakeven Point for Sugar-Glazed = 585,000

Breakeven Point for Cream-Filled = (2/6) * 1,170,000
Breakeven Point for Cream-Filled = 390,000

Breakeven Point for Giant-Sized = (1/6) * 1,170,000
Breakeven Point for Giant-Sized = 195,000