Question

Tyson Foods is the largest U.S. beef and chicken​ supplier, processing more than​ 100,000 head of cattle and​ 40-plus million chickens weekly. Primary distribution channels are supermarket meat departments.​ However, the company is now expanding distribution into convenience stores. There are almost​ 150,000 gas stations and convenience stores where the company would like to sell hot Buffalo chicken bites near the checkout. This is a promising​ channel, as sales are growing considerably at these retail outlets and profit margins on prepared foods are higher than selling raw meat to grocery stores. Tyson will have to hire fifteen more sales representatives at a salary of ​$25 comma 000 each to expand into this distribution channel because many of these types of stores are independently owned. Each convenience store is expected to generate an average of​ $50,000 in revenue for Tyson. If​ Tyson's contribution margin is 40 percent on this​ product, what increase in sales will it need to break even on the increase in fixed costs to hire the new sales​ reps? The increase in the fixed costs is ​$ nothing. ​(Round to the nearest​ dollar.) The increase in sales is ​$ nothing. ​(Round to the nearest​ dollar.)

Answer 1

Answer:

i. Increase in sales to break even is $937,500

ii. Increase in sales is $125,000

iii Increase in fixed cost is $375,000

Explanation:

The increase in fixed deposit is computed as shown below;

=The Salary of each sales representative × The number of sales representative hired

= $25,000 × 15

= $375,000

The increase in sales is computed as ;

= Average revenue ÷ Contribution margin

= $50,000 ÷ 40%

=$125,000

The increase in sales to break even is therefore;

= Increase in fixed deposit ÷ Contribution margin

= $375,000 ÷ 40%

= $937,500