Acct 581 Notes

Kim Kane sells lunches from a pushcart in a pedestrian mall near a busy office area. Over time, Kim has

established a reputation for selling quality sandwiches, soups, and salads. Kim sells each sandwich for $4, each

bowl of soup for $3, and each salad for $3. Customers also can purchase a bottle of water or a can of soda from

Kim for $1.

For every ten customers, three customers purchase both a soup and a sandwich; three customers purchase both a

soup and a salad; two customers purchase only a sandwich; one customer purchases only a bowl of soup, and

one customer purchases only a salad. Six of every ten customers also purchase a bottled water or soda with their

food. Kim does not offer any price discounts for purchasing multiple items – thus, a customer who purchases

both a soup and a sandwich is charged $7 (i.e., $4 for the sandwich + $3 for the soup).

Kim estimates that her variable costs are as follows: $1.25 for each sandwich; $1.00 for each bowl of soup; and

$0.75 for each salad. She buys soda and water in bulk for $0.25 a can (or bottle). Finally, Kim estimates that her

fixed costs (which include the cost of her time, her pushcart license, plastic and paper products, condiments, and

so on) total $4,950 per month.

How many customers does Kim need to serve in a month to break even? How much sales revenue must Kim

generate each month to break even? (hint: use sales per 10 customers to determine Kim’s bundle and bundle

contribution margin).

Sandwich

Soup

Salad

Drink

Price

$4.00

$3.00

$3.00

$1.00

VC (per item)

$1.25

$1.00

$0.75

$0.25

CM (per item)

$2.75

$2.00

$2.25

$0.75

7

3+1 4

6

3+2

# of orders

5

3+3+1

Bundle

Total CM:

$13.75

$14.00

$9.00

$4.50

= $59.00

Total Price:

{Bundle}

$20.00

$21.00

$12.00

$6.00

= $41.25

$0 = 41.25 x # of bundles sold - $4,950

# of bundles = 120

# of customers = 120 bundles x 10 customers/bundle

- 600...