Question

Homework Saved Help Save & Exit Sut Check my wol Exercise 3-47 (Algo) Multiproduct CVP Analysis (LO 3-4) Mission Foods produces two flavors of tacos-chicken and fish--with the following characteristics. Selling price per taco Variable cost per taco Expected sales (tacos) Chicken Fish $ 3.99 $ 5.40 1.95 2.70 209,000 303,000 The total fixed costs for the company are $122,000. Required: a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix would be 37 percent chicken and 63 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? Complete this question by entering your answers in the tabs below. Required A Required B Required Assumina that the product mix would be 37 percent chicken and 63 percent fish at the break-even point compute the break- < Prev 4 of 5 !!! Next > 16 A

Answer 1

Answer a.

Profit

$1,103,650

Explanation:

	Chicken	Fish	Total
Selling price	$3.90	$5.40
Less: Variable cost	$1.95	$2.70
Contribution per unit	$1.95	$2.70
* Number of units	209,000	303,000
Total contribution	$407,550	$818,100	$1,225,650
Less: Fixed costs			$122,000
Profit			$1,103,650

Answer b.

	Break-even volume
Chicken	18,653 units.
Fish	31,760 units

Explanation:

Note : Rounding intermediate calculations to 2 decimal places

Weighted average contribution margin per unit = (Contribution per unit of chicken * Sales mix) + (Contribution per unit of chicken * Sales mix)

= ($1.95 * 37%) + ($2.70 * 63%) = 0.7215 + 1.701 = $2.42

Break-even volume = Fixed costs / Weighted average contribution margin per unit

= $122,000 / $2.42 = 50,413 units

For chicken = 50,413 units * 37% = 18,653 units.

For Fish = 50,361 units * 63% = 31,760 units.

Answer c

	Break-even volume
Chicken	46,476 units
Fish	11,619 units.

Explanation:

Note : Rounding intermediate calculations to 2 decimal places

Sales mix: Chicken = 4/ 5 = 80 % ; Fish = 1 / 5 = 20%

Weighted average contribution margin per unit = (Contribution per unit of chicken * Sales mix) + (Contribution per unit of chicken * Sales mix)

= ($1.95 * 80%) + ($2.70 * 20%) = 1.56 + 0.54 = $2.10

Break-even volume = Fixed costs / Weighted average contribution margin per unit

= $122,000 / $2.10 = 58,095 units

For chicken = 58,095 units * 80% = 46,476 units.

For Fish = 58,095 units * 20% = 11,619 units.