Question

Help please

pts) A company makes frozen Mexican dinners and distributes them to restaurants. The data for 2016 were: Chicken Tacos Beef Enchiladas Selling Price Variable cost Number of units $5 $3 250,000 $7 $4 125,000 Fixed costs ware $735,000 and are not affected by the product mix. a) Compute their net income for 2016 b) Compute the break-even point in units, assuming the ratio of the products in the mix is as shown in the above table.

Answer 1

Answer:

For Chicken Tacos:

Contribution Margin per unit = Selling price per unit – Variable cost per unit
Contribution Margin per Unit = $5 - $3
Contribution Margin per unit = $2

For Beef Enchiladas:

Contribution Margin per unit = Selling price per unit – Variable cost per unit
Contribution Margin per Unit = $57- $4
Contribution Margin per unit = $3

Answer of Part b:

Sales Mix Ratio = 250,000: 125,000 or 2:1

Weighted Average Contribution Margin per Unit = ($2 * 2/3) + ($3 * 1/3)
Weighted Average Contribution Margin per Unit = $1.33 + 1.00
Weighted Average Contribution Margin per Unit = $2.33

Break Even Point (in Units) = Fixed Cost / Weighted Average Contribution Margin per Unit
Break Even Point (in Units) = 735,000 / 2.33
Break Even Point (in Units) = 315,451 Units