Debbie's Kitchen sells three types of soups: tomato basil, cheddar dill, and loaded potato. The following table shows the sales price and variable cost for each type. Debbie incurs $200,000 a year in fixed costs. Assume that the restaurant has a sales mix of two tomato basil servings, two cheddar dill servings and one loaded potato serving.
Type | Sales Price | Variable Cost | Contribution Margin | |
Tomato basil | $3.00 | $1.50 | $1.50 |
Cheddar dill | 4.50 | 2.00 | 2.50 |
Loaded potato | 4.50 | 2.50 | 2.00 |
Required:
a. | How many servings of each type will be sold at the break-even point? |
b. | What amount of revenue would need to be generated by each type of soup for |
the company to earn $25,000 in operating income?