The New England Catering Company specializes in preparing tasty main courses tha

Question

The New England Catering Company specializes in preparing tasty main
courses that are frozen and shipped to the finer restaurants in the Boston
area. When a diner orders the item, the restaurant heats and serves it. The
budget data for 2018 are:

The items are prepared in the same kitchen, delivered in the same trucks, and so
forth. Therefore, the fixed costs of $2,500,000 are unaffected by the specific
products. Boston’s tax rate is 35%.

Required:
a) Compute the planned net income for 2018.
b) Compute the break-even point in revenues, assuming that the planned
sales mix is maintained.

PRODUCT Chicken Cordon Bleu Veal Marsala Selling price to restaurants $11 $15 Variable expenses 6 9 Contribution margin $5 $6 Number of units 600,000 200,000

Explanation / Answer

Net Income=(5*600000+6*200000-2500000)*(1-35%)=1105000

Lets say break even point be x Chicken and y Veal
Given x/y=600000/200000=3
=>y=x/3
So, Net Income=(x*5+y*6-2500000)*(1-35%)=(x*5+x/3*6-2500000)*(1-35%)
At break even point, net income=0

Hence, (x*5+x/3*6-2500000)*(1-35%)=0

or, 11x/5-2500000=0
So, 11x/5=2500000
=>x=1136364
hence, y=378788

So, total revenue=1136364*11+378788*15=18181824

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