Ballpark Concessions currently sells hotdogs. During a typical month, the stand reports a profit of $9,000 with sales of $50,000, fixed costs of $21,000 and variable costs of $0.64 per hotdog.

Next year, the company plans to start selling nachos for $3 per unit. Nachos will have a variable cost of $0.72 and new equipment and personnel to produce nachos will increase monthly fixed costs by $8,808. Initial sales of nachos should total 5,000 units. Most of the nacho sales are anticipated to come from current hot dog purchasers, therefore, monthly sales of hot dogs will decline to $20,000.

After the first year of nacho sales, the company president believes that hotdog sales will increase to approximately $36,000 a month and nacho sales will increase to 7,500 units a month.

1. Determine the monthly breakeven point before the introduction of nachos (currently).

2. Determine the monthly breakeven point during the first year of nacho sales.

3. What will happen to the breakeven point in the second year of nacho sales? Why? What would you recommend?

Answer rating: 100% (QA)

Ballpark Concessions currently sells hotdogs During a typical month the stand reports a p... View the full answer