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Bobbie's Bagel Shop sells only coffee and bagels. Bobbie estimates that every time she sells one bagel, she sells four cups of coffee. The budgeted cost information for Bobbie's products for 2011 follows:
Required:
1. How many cups of coffee and how many bagels must Bobbie sell in order to break even assuming the sales mix of four cups of coffee to one bagel, given previously?
2. If the sales mix is four cups of coffee to one bagel, how many units of each product does Bobbie need to sell to earn operating income before tax of $28,000?
3. Assume that Bobbie decides to add the sale of muffins to her product mix. The selling price for muffins is $3.00 and the related variable costs are $0.75. Assuming a sales mix of three cups of coffee to two bagels to one muffin, how many units of each product does Bobbie need to sell in order to break even? Comment on the results.
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