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Should the raise the price of the burgers

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Reference no: EM132526309

The Simpson Burger Joint currently has the following financial information:

Selling price of burger: $4.00

Variable cost of burger. $2.25

Fixed cost. $50,000

currently making/selling 30,000 burgers

capacity 50,000 burgers

Question 1: What is their:

1.1) break even number of burgers

1.2) current income/loss

1.3) margin of safety in burgers

1.4) degree of operating leverage

1.5) contribution margin ratio

Question 2: Homer has suggested using a bigger bun which would add $0.30 to the cost of each burger. Homer is convinced that sales (units) can increase 20% with this bigger bun should they do it?

Question 3: Bart has suggested raising the price of the burgers $0.25. He is convinced that sales would only drop 5% (units). Should they raise the price of their burgers?

Question 4: Jessica has suggested giving away a bobble-head of the world's greatest singer (according to Jessica Simpson) with each burger. The bobble-heads cost $0.35 each. In addition, Jessica has suggesting spending $2500 on an ad campaign promoting this give-away. She is convinced that sales will increase 5000 burgers if this is undertaken. Should they?

Reference no: EM132526309

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