I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 10 comma 000 gallons last year. For every five gallons of ice cream sold, one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $ 39,100 and additional information follows:
Rocky Road Peanut Butter Fruity Tooty
Sales price per pound $8.25 $5.50 $4.25
Variable cost per pound $3.25 $2.25 $3.75
Breakeven sales in dollars for I Scream For Ice Cream is:_______.
A. $100,625.
B. $33,925.
C. $73,025.
D. $57,500.

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aquialaska aquialaska · Answer 1 · 2020-05-18T12:52:20+02:00

Answer:

C. $73,025

Explanation:

The computation of Break-even sales in dollars is shown below:-

For every 5 gallons, contribution margin = CM of Fruity tooty + (CM of Peanut butter) × 2 + (CM of Rocky Road) × 2

= ($4.25 - $3.75) + ($5.50 - $2.25) × 2 + ($8.25 - $3.25) × 2

= $0.5 + $6.5 + $10

= $17

Breakeven = Fixed cost ÷ Contribution margin

= $39,100 ÷ $17

= 2,300

As each contribution margin requires 5 gallons,So total breakeven sales of Ice cream = 2,300 × 5

= 11,500

In dollars considering units required for each 5 gallons = (2,300 × 2 × $8.25) + (2,300 × 2 × $5.50) + (2,300 × $4.25)

= $37,950 + $25,300 + $9,775

= $73,025