Question

Mission Foods produces two flavors of tacos, chicken and fish, with the following characteristics:

	Chicken			Fish
Selling price per taco	$	3.40		$	4.90
Variable cost per taco		1.70			2.45
Expected sales (tacos)		207,000			295,000

The total fixed costs for the company are $118,000.

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. (In your computations, round up the total units to break-even to the nearest whole number and round other intermediate calculations to 2 decimal places. Round your final answers up to the nearest whole unit.)

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? (In your computations, round up the total units to break-even to the nearest whole number and round other intermediate calculations to 2 decimal places. Round your final answers up to the nearest whole unit.)

Answer 1

a.

Particulars	Chicken	Fish	Total
Sales	$ 703,800	$ 1,445,500	$ 2,149,300
Variable Cost	$ 351,900	$ 722,750	$ 1,074,650
Contribution	$ 351,900	$ 722,750	$ 1,074,650
Fixed Cost			$ 118,000
Profit			$ 956,650

b.

We first need weighted average breakeven

Weighted average break even = 1.70 X 37% + 2.45 X 63% = 2.17

Break even = 118,000 / 2.17 = 54,378 units

Chicken = 54,378 X 37% = 20,120 units (20,097 if not rounded off weighted average)
Fish = 54,378 - 20,120 = 34,258 units (34,219 if not rounde off weighted average)

Particulars	Chicken	Fish	Total
Sales	$ 68,408	$ 167,864	$ 236,272
Variable Cost	$ 34,204	$ 83,932	$ 118,136
Contribution	$ 34,204	$ 83,932	$ 118,136
Fixed Cost			$ 118,000
Profit			$ 136

$ 136 is due to round off difference

c

Weighted average contribution = 1.7 X 80% + 2.45 X 20% = 1.85

Break even = 118,000 / 1.85 = 63,784 units

Chicken (80%) = 51,027
Fish = 12,757

Particulars	Chicken	Fish	Total
Sales	$ 173,492	$ 62,509	$ 236,001
Variable Cost	$ 86,746	$ 31,255	$ 118,001
Contribution	$ 86,746	$ 31,255	$ 118,001
Fixed Cost			$ 118,000
Profit			$ 1