Question

Three entrepreneurs were looking to start a new brewpub near sacramento, california, called roseville brewing company (rbc). brewpubs provide two products to customers—food from the restaurant segment and freshly brewed beer from the beer production segment. both segments are typically in the same building, which allows customers to see the beer-brewing process.

Answer 1

A lot of information is missing as well as the requirements, so I looked for similar questions.

The requirements are:

a. What is the break-even point in sales dollars for RBC?

b. What is the margin of safety for RBC?

c. What sales dollars would be required to achieve an operating profit of $250.000? $490.000?

a) break even point = total fixed costs / contribution margin

• total fixed costs = $1,125,430
• contribution margin = $1,427,642 / $1,953,000 = 73%

break even point = $1,124,430 / 73% = $1,540,315

b) margin of safety = current sales - break even point = $1,953,000 - $1,540,315 = $412,685

c) operating profit = $250,000 ⇒ ($1,125,430 + $250,000) / 73% = $1,884,150.69

operating profit = $490,000 ⇒ ($1,125,430 + $490,000) / 73% = $2,212,917.81