Hot Juices, Inc., makes hot sauce for use by various Mexican restaurants in the Northeast. It has asked you to help it do some analysis of its business using the following data:

REQUIRED:

a. Calculate the contribution margin ratio.

b. What is Hot Juices, Inc.’s breakeven point in revenue dollars?

c. If the company wants to increase its before- tax profits to $150,000, how much revenue will it need to make?

d. The company has been approached by a salesman from a national distributor of office products that says he can reduce Hot Juices, Inc.’s variable costs by 5% if the company buys a machine that costs $50,000. Should the company buy this machine? Why or why not? Develop a brief business case to explain your conclusions.

Transcribed Image Text:

Hot Juices, Inc. Revenue $900,000 Less: Variable Costs 450,000 Total Contribution Margin 450,000 Less: Fixed Costs 400,000 Profit Margin before Tax $50,000