Question

As a prospective owner of a club known as the Red Rose, you are interested in determining the volume of sales dollars necessary for the coming year to reach the break-even point. You have decided to break down the sales for the club into four categories. Your best estimate of the beer sales is that 30,000 drinks will be served. The selling price for each unit will average $1.50. The cost is $0.75. The second major category is meals, which you expect to be 10,000 units with an average price of $10.00 and a cost of $5.00. The third major category is desserts and wine, of which you also expect to sell 10,000 units but with an average price of $2.50 per unit sold and a cost of $1.00 per unit. The final category is lunches and inexpensive sandwiches. You expect to sell 20,000 units at an average price of $6.25 and an average cost of $3.25. Your fixed cost (i.e. rent , utilities, and so on) is $1,800 per month plus $2,000 per month for entertainment. Using this information, the break-even point in dollars per month is $ . Round your answer to the nearest dollar. Do not use a comma thousand separator. Do not enter a $ in your answer.

Answer 1

Red Rose

Using this information, the break-even point in dollars per month is $ 16092.

Step-by-step explanation:

a) Data and Calculations:

Beer Sales Meals Desserts/Wine Lunches

Sales unit 30,000 10,000 10,000 20,000

Selling price per unit $1.50 $10.00 $2.50 $6.25

Cost price per unit $0.75 $5.00 $1.00 $3.25

Contribution per unit $0.75 $5.00 $1.50 $3.00

Total Sales revenue 45,000 100,000 25,000 125,000 $295,000

Total variable cost 22,500 50,000 10,000 65,000 $147,500;

per month = $12,292 ($147,500/12)

Total contribution = $147,500

Fixed cost = $3,800 ($1,800 + $2,000) per month

Total fixed cost per year = $45,600 ($3,800 * 12)

Break-even in sales dollars per month = Total costs = Fixed cost + Variable cost per month

= $3,800 + $12,292 ($147,500/12)

= $16,092