Question

Mission Foods produces two flavors of tacos, chicken and fish, with the following characteristics: Chicken Fish Selling price per taco $ 3.60 $ 5.40 Variable cost per taco 1.80 2.70 Expected sales (tacos) 191,000 305,000 The total fixed costs for the company are $116,000.

b. Assuming that the product mix would be 45 percent chicken and 55 percent fish at the break-even point, compute the break-even volume.

Break-even Volume

Chicken tacos ?

Fish tacos ?

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?

Break-even Volume

Chicken tacos ?

Fish tacos?

Answer 1

Calculation of Contribution per unit for both flavors

Chicken= Sale price per unit - Variable cost per unit = 3.6 - 1.8 = 1.8 per unit

Fish = Sale price per unit - Variable cost per unit = 5.4 - 2.7 = 2.7 per unit

Total fixed costs = $116000

b.

Product mix = 45:55

Fixed cost attributable to chicken = 116000*45% = $52200

Fixed cost attributable to fish = 116000*55% = $63800

Calculation of Break even volume = Fixed cost/Contribution per unit

Chicken = 52200/1.8 per unit = 29000 tacos

Fish = 63800/2.7 = 23629.629629 units i.e. 23630 units

c.

If the product mix change to 4 chicken tacos for each fish tacos i.e. 4:1 or 80:20

Fixed cost attributable to chicken = 116000*80% = $92800

Fixed cost attributable to fish = 116000*20% = $23200

Calculation of Break even volume = Fixed cost/Contribution per unit

Chicken = 92800/1.8 per unit = 51555.55556 tacos i.e. 51556 tacos

Fish = 23200/2.7 = 8592.592593 units i.e. 8593 units