Extensions of the CVP Model—Semifixed (Step) Costs
Sam’s Sushi serves only a fixed price lunch. The price of $10 and the variable cost of $4 per meal remain constant regardless of volume. Sam can increase lunch volume by opening and staffing additional check out lanes. Sam has three choices:
|
|
Monthly Volume Range |
Total |
|
|
(Number of Meals) |
Fixed Costs |
|
1 Lane |
0–5,000 |
$33,000 |
|
2 Lanes |
5,001–8,000 |
39,000 |
|
3 Lanes |
8,001–10,000 |
52,500 |
Required
a. Calculate the break even point(s).
b. If Sam can sell all the meals he can serve, should he operate at one, two, or three lanes? Support your answer.