As a prospective owner of a club known as The Red Rose, you are interested in determining the dollar volume of sales needed to turn a profit next year. You decided to break down the club's sales into four categories, with beer being the first. Your estimate of beer sales is that you will serve 30,000 servings. The selling price per unit will average $2.50; your cost is $1.25. The second category is food, of which he expects to sell 10,000 units with an average unit price of $8.00 and a cost of $5.00. The third category is desserts and wine, of which it also expects to sell 10,000 units, but with an average unit price of $3.50 and a cost of $1.25. The last category is economy lunches and sandwiches, of which it expects to sell a total of 20,000 units with an average price of $9.00 and a per unit cost of $5.00. Its annual fixed costs (i.e., rent, utilities, and entertainment) are equal to $83,500.

Calculate the annual break-even point and answer the following questions by choosing the appropriate options according to your criteria:

The break-even point in lunch and sandwich units is:

Answer 1

Choose...

The break-even point in beer money is:

Answer 2

Choose...

If the company achieves its projected sales:

Answer 3

Choose...

The company will generate gross profits of:

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