Purchase Solution

# Rocky Mountain Catering Company: Break even

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Rocky Mountain Catering Company. The budget data for 20X5 are as follows: (Use Excel to answer these.)

Selling price to restaurants \$5 \$7
Variable Expenses \$3 \$4
Contribution Margin \$2 \$3
Number of meals 250,000 125,000

The company prepares the items in the same kitchens, delivers them in the same trucks, and so forth. Therefore, decisions about the individual products do not affect the fixed costs of \$735,000.

1. Compute the planned net income for 20X5.
2. Compute the break even point in units, assuming that the company maintains its planned sales mix.
3. Compute the break even point in units if the company sells only tacos and if it sells only enchiladas.
4. Suppose the company sells 78,750 units of enchiladas and 236,250 units of tacos, for a total of 315,000 units. Compute the net income. Compute the new break-even point with this new sales mix. What is the major lesson of this problem?

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• MSc, University of Virginia
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