Question

I Scream For Ice Cream sells specialty ice cream in three​ flavors: Rocky​ Road, Peanut​ Butter, and Fruity Tooty. It sold 10 comma 000 gallons last year. For every five gallons of ice cream​ sold, one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $ 39,100 and additional information​ follows:

Rocky Road Peanut Butter Fruity Tooty
Sales price per pound $8.25 $5.50 $4.25
Variable cost per pound $3.25 $2.25 $3.75
Breakeven sales in dollars for I Scream For Ice Cream is:_______.
A. $100,625.
B. $33,925.
C. $73,025.
D. $57,500.

Answer 1

C. $73,025

Step-by-step explanation:

The computation of Break-even sales in dollars is shown below:-

For every 5 gallons, contribution margin = CM of Fruity tooty + (CM of Peanut butter) × 2 + (CM of Rocky Road) × 2

= ($4.25 - $3.75) + ($5.50 - $2.25) × 2 + ($8.25 - $3.25) × 2

= $0.5 + $6.5 + $10

= $17

Breakeven = Fixed cost ÷ Contribution margin

= $39,100 ÷ $17

= 2,300

As each contribution margin requires 5 gallons,So total breakeven sales of Ice cream = 2,300 × 5

= 11,500

In dollars considering units required for each 5 gallons = (2,300 × 2 × $8.25) + (2,300 × 2 × $5.50) + (2,300 × $4.25)

= $37,950 + $25,300 + $9,775

= $73,025