a. To calculate the anticipated level of profits, we need to calculate the total revenue and total variable costs for each product, and then subtract the total variable costs and fixed costs from the total revenue.
Chicken:
Total revenue = $3.90 x 201,000 = $783,900
Total variable costs = $1.95 x 201,000 = $392,295
Contribution margin = $391,605
Fish:
Total revenue = $5.30 x 303,000 = $1,607,900
Total variable costs = $2.65 x 303,000 = $803,295
Contribution margin = $804,605
Total contribution margin = $391,605 + $804,605 = $1,196,210
Total fixed costs = $107,000
Anticipated profits = Total contribution margin - Total fixed costs = $1,196,210 - $107,000 = $1,089,210
b. Weighted-average contribution margin = (0.42 x $1.95) + (0.58 x $2.65) = $2.36
Break-even volume = Total fixed costs ÷ Weighted-average contribution margin = $107,000 ÷ $2.36 = 45,339 tacos
c. If the product sales mix changes to four chicken tacos for each fish taco, then the new product mix is 80% chicken and 20% fish.
Weighted-average contribution margin = (0.80 x $1.95) + (0.20 x $2.65) = $2.06
Break-even volume = Total fixed costs ÷ Weighted-average contribution margin = $107,000 ÷ $2.06 = 51,942 tacos