Question

As a prospective owner of a club known as the Red Rose, you are interested in
determining the volume of sales dollars necessary for the coming year to reach the
break-even point. You have decided to break down the sales for the club into four
categories, the first category being beer. Your estimate of the beer sales is that
36,000 drinks will be served. The selling price for each unit will average $1.50; the
cost is $1.25. The second major category is meals, which you expect to be 10,000
units with an average price of $12.50 and a cost of $6.00. The third major category
is desserts and wine, of which you also expect to sell 10,000 units, but with an
average price of $2.75 per unit sold and a cost of $0.75 per unit. The final category
is lunches and inexpensive sandwiches, which you expect to total 20,000 units at
an average price of $6.25 with a food cost of $3.75. Your fixed cost (i.e., rent,
utilities, and so on) is $2,000 per month plus $2,200 per month for entertainment.
a) For Red Rose, the monthly break-even point in dollars = $ per month (round
your response to two decimal places).

Answer 1

For Red Rose, the monthly break-even point in dollars is $118,838.74 per month.

While the products' monthly break-even points in dollars are as follows:

                                          Beer           Meals           Desserts     Lunches &

                                                                                   & Wine     Sandwiches

Monthly break-even point

 in dollars                      $67,200   $9,304.39     $30,237.58   $12,096.77

What is the break-even point?

The break-even point describes a situation when the total revenues equal the total costs (variable and fixed).

At the break-even point (units or dollars), the company does not incur any loss or make a profit.

Data and Calculations:

                                       Beer      Meals        Desserts      Lunches &

                                                                       & Wine        Sandwiches

Sales                                        36,000    10,000         10,000         20,000

Selling price per unit                 $1.50    $12.50         $2.75             $6.25

Cost price per unit                    $1.25     $6.00          $0.75             $3.75

Contribution margin                $0.25     $6.50          $2.00             $2.50

Contribution margin ratio           17%        52%             73%                40%

Total contribution margin    $9,000     $65,000     $20,000       $50,000
Total contribution margin = $144,000

Weighted Contribution       6.25%       45.14%       13.89%          34.72% ($50,000/$144,000 x 100)

Fixed costs = $4,200 ($2,000 + $2,200)

                                               Beer      Meals           Desserts      Lunches &

                                                                                  & Wine        Sandwiches

Monthly break-even point

 in dollars                      $67,200   $9,304.39     $30,237.58   $12,096.77

                            ($4,200/6.25%) ($4,200/45.14%)  ($4,200/13.89%) ($4,200/34.72%)

Total monthly break-even point in dollars = $118,838.74 ( $67,200 + $9,304.39 + $30,237.58 + $12,096.77)

Thus, for Red Rose, the monthly break-even point in dollars is $118,838.74 per month.

Learn more about the weighted contribution margin at https://brainly.com/question/15850919