On a typical day, how many “Ripped Pig” sandwiches must be sold in order to brea
ID: 2712135 • Letter: O
Question
On a typical day, how many “Ripped Pig” sandwiches must be sold in order to break even?
(Please show all work)
Given Information:
- On a typical day, Cat and Joe served between 75 and 125 patrons, with an average of 100.
- “Ripped Pig” pulled pork sandwich, coleslaw, baked beans, and French fries for $12.
- The company had variable costs, which included the cost of the food, clamshell packaging, and variable overhead. Variable costs were 40% of the company’s revenues. There was no labor cost as neither Joe nor Cat drew a wage or salary.
- Fixed costs included items such as gas for the generator, maintenance, business licenses, and truck depreciation. These costs totaled $10,000 per year. The operational year for the food truck was 180 days. Corporate income tax rates for small businesses in British Columbia were approximately 20% around that time.
Explanation / Answer
Fixed cost per day = Annual fixed cost / NO. of working days
= 10,000/ 180
= 55.556
Contribution margin per unit = Selling price – variable cost per unit
=12 –(12x0.40)
= 12-4.80
= 7.20
Daily sale units to break even = Fixed cost per day/ contribution margin per unit
=55.556/ 7.20
=7.72 units
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