Ballpark Concessions currently sells hot dogs. During a typical month, the stand reports an operating profit of $9,000 with Revenues of $50,000, fixed costs of $21,000, and variable costs of $0.64 per hot dog.
Question 2:
Ballpark Concessions currently sells hot dogs. During a typical month, the stand reports an operating profit of $9,000 with Revenues 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.
Instructions:
(a) Determine the monthly contribution margin and variable costs before adding nachos.
(b) Determine the monthly breakeven sales in units before adding nachos.
(c) Determine the monthly breakeven quantities during the first year of nachos sales, assuming constant sales mix of 1 hotdog and 2 units of nachos.
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