Ballpark Concessions Currently Sells Hot Dogs

question 52

Essay

Ballpark Concessions currently sells hot dogs. During a typical month, the stand reports a profit of $9,000 with sales of $50,000, fixed costs of $21,000, and variable costs of $0.64 per hot dog.
Next year, the company plans to start selling nachos for $3 per unit. Nachos will have a variable cost of $0.72 and new equipment and personnel to produce nachos will increase monthly fixed costs by $8,808. Initial sales of nachos should total 5,000 units. Most of the nacho sales are anticipated to come from current hot dog purchasers, therefore, monthly sales of hot dogs are expected to decline to $20,000.
After the first year of nacho sales, the company president believes that hot dog sales will increase to $33,750 a month and nacho sales will increase to 7,500 units a month.
Required:
a.Determine the monthly breakeven sales in dollars before adding nachos.
b.Determine the monthly breakeven sales during the first year of nachos sales, assuming a constant sales mix of 1 hotdog and 2 units of nachos.

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Definitions:

Precipitation

Any form of water, liquid or solid (rain, snow, hail, sleet), that falls from clouds and reaches the ground.

Screen Size

The diagonal measurement of a screen or display, typically measured in inches, representing the size of the visual display area.

HDTVs

High-definition televisions that offer higher resolution and clearer imaging than standard definition TVs.

Manufacturer

A person or company that makes goods for sale, often involving the use of machines, tools, and labor.