One of Niagara Catering Company’s specialties is Mexican dinners that it prepares, freezes, and ships to restaurants in southwestern Ontario. When a diner orders an item, the restaurant heats and serves it. The budget data for 2012 are

The company prepares the items in the same kitchens, delivers them in the same trucks, and so forth. Therefore, decisions about the individual products do not affect the fixed costs of $735,000.

1. Compute the planned net income for 2012.

2. Compute the break-even point in units, assuming that the company maintains its planned sales mix.

3. Compute the break-even point in units if the company sells only tacos and if it sells only enchiladas.

4. Suppose the company sells 78,750 units of enchiladas and 236,250 units of tacos, for a total of 315,000 units. Compute the net income.

Compute the new break-even point with this new sales mix. What is the major lesson of this problem?

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Product Chicken Tacos Beef Enchiladas Selling price to restaurants Variable expenses Contribution margin Number of units $ 5 3 $ 4 4 3 250,000 125,000