Question

I scream for ice cream sells specialty ice cream in three​ flavors: rocky​ road, peanut​ butter, and fruity tooty. it sold 19 comma 00019,000 gallons last year. for every five gallons of ice cream​ sold, one gallon is fruity tooty and the remainder is split evenly between peanut butter and rocky road. fixed costs for i scream for ice cream are $ 27 comma 500$27,500 and additional information​ follows: rocky road peanut butter fruity tooty sales price per gallon $ 5.25$5.25 $ 5.75$5.75 $ 8.25$8.25 variable cost per gallon $ 3.5$3.5 $ 5$5 $ 2.25$2.25 the breakeven sales volume in gallons for i scream for ice cream is

Answer 1

The break-even sales volume in gallons for I scream ice-cream is calculated as follows:

$\begin{tabular} {|p{2cm}|c|c|c|} & Rocky Road & Peanut Butter & Fruity Tooty\\[2ex] Sales price per gallon&\ 5.25&\ 5.75&\ 8.25\\ Variable cost per gallon&\ 3.50&\ 5.00&\ 2.25\\ Contribution margin/unit&\ 1.75&\ 0.75&\ 6.00\\ Sales mix&2&2&1\\ Contribution margin&3.50&1.50&6.00 \end{tabular}$

The total sales mix is 5 and the total contribution margin is 11. This gives the weighted average contribution margin is given by 11 / 5 = 2.2

The break-even sales volume is given by (fixed cost + operating income) divided by the weighted average contribution margin.

This is given by ($27,500 + 0) / 2.2 = $12,500