I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 13,000 gallons last year. For every five gallons of ice cream sold, one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $28,800 and additional information follows: Breakeven sales in dollars for I Scream For Ice Cream is

Question

I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road, Peanut Butter, and Fruity Tooty. It sold 13,000 gallons last year. For every five gallons of ice cream sold, one pound is Fruity Tooty and the remainder is split evenly between Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $28,800 and additional information follows:  Breakeven sales in dollars for I Scream For Ice Cream is

Quizplus · Accepted Answer

To calculate the breakeven sales in dollars, we need to use the following formula:

Breakeven sales = fixed costs / contribution margin ratio

First, let's calculate the contribution margin ratio. We know that 1 pound out of every 5 gallons sold is Fruity Tooty, which means 1/5 of the total sales are Fruity Tooty. The remaining 4/5 are split evenly between Peanut Butter and Rocky Road.

Contribution margin per pound of Fruity Tooty = selling price per gallon x gallons per pound - variable cost per gallon = $6 x 5 - $3 = $27
Contribution margin per pound of Peanut Butter and Rocky Road (combined) = selling price per gallon x gallons per pound / 2 - variable cost per gallon = ($5 x 5) / 2 - $2 = $8.5

Contribution margin ratio = total contribution margin / total sales = (1/5) x $27 + (4/5) x $8.5 / $6 = 0.425

Now we can calculate the breakeven sales:

Breakeven sales = $28,800 / 0.425 = $67,764.71

Therefore, the closest option is C, $73,800.

I Scream for Ice Cream Sells Specialty Ice Cream in Three