Case Study: (for the whole exercise we suppose that the rental for the space costs $200.00) After reviewing the website of Sam’s club, we noticed that we could buy a snack vending machine starting from $898.00. Now, let’s suppose that we will have only one type of snack bars, which is Lay’s chips. If we purchase 50 packets, the supplier will charge us $35.50 ($25 for the product and $10.50 for the shipping), which makes the cost to be $0.71 per packet. So, $1.50 may be an ideal price that we charge for our customers. By using this price, our contribution margin will be $0.79 per bar ($1.50 per bar – $0.71 per bar), and we need to sell 1,137 packets ($898.00 / $0.79 per packet) to cover the price of the vending machine. After covering the initial investment, our monthly break-even point will be 254 packets ($200.00 / $0.79 per packet), which means $381.00 (254 packets * $1.50 per bar). After reviewing the website of Sam’s club, we noticed that the price of a drink vending machine is $3,798.00. In this part, we suppose that will sell only one type of drinks, which Coca-Cola. If purchase 32 cans, we will be charged $34.00 (no shipping price), which makes the cost to be $1.06 per can. For this reason, we are going to choose $2.00 as our selling price. In this case, our contribution margin will be $0.94 per can ($2 per can – $1.06 per can), and we have to sell 4,041 cans ($3,797.00 / $0.94 per can) in order to cover the price of our machine. After covering the initial investment, the monthly break-even point will be 213 cans ($200.00 / $0.94 per can), which means $426.00 (213 cans * $2.00). Finally, let’s suppose that we are offering two products, which are Lay’s chips and M&Ms chocolate. Concerning the Lay’s chips, the price, variable cost, and contribution margin will be the same as the first part. On the other hand, if we purchase 48 M&Ms packets, we will pay $33.75 (no shipping price)., which means $0.70 per packet. For this product we will charge our customers $1.00, which means that the contribution margin for this product will be $0.30 per packet ($1.00 per packet – $0.70 per packet). First, let’s suppose that we will be using the 50/50 level of sales mix, we will need to sell 569 packets of chips (($898.00 * 0.5) / $0.79 per packet) and 1,497 packets of M&Ms (($898.00 * 0.5) / $0.30 per packet) to cover our initial investment. After covering this investment, our break-even point will be 127 packets (($200.00 * 0.5) / $0.79 per packet) for the chips, which means $190.50 (127 packets * $1.5 per packet), and 334 packets (($200.00 * 0.5) / $0.30 per packet) for the M&Ms, which means $334.00 (334 packets * $1.00 per packet). Second, let’s suppose that we will be using the 70/30 level of sales mix. In this case, we need to sell 796 of chips packets (($898.00 * 0.7) / $0.79 per packet), and 898 of M&Ms packets (($898.00 * 0.3) / $0.30 per packet) in order to cover the vending machine cost. After achieving this point, our break-even point will be 178 packets (($200.00 *0.7) / $0.79 per packet) for the chips, which means $267.00 (178 packets * $1.50 per packet), and 200 packets for the M&Ms (($200.00 * 0.3) / $0.30 per packet), which means $200.00 (200 packets * $1.00 per packet). Finally, let’s suppose that we will be using the 30/70 level of sales mix. So, we will have to sell 341 of chips packets (($898.00 * 0.3) / $0.79 per packet), and 2,096 of M&Ms packets (($898.00 * 0.7) / $0.30 per packet) in order to the cost of our machine. After covering this cost, our break-even point will be 76 packets (($200.00 * 0.3) / $0.79 per packet) for the chips, which means $114.00 (76 packets * $1.5 per packet), and 467 packets (($200.00 * 0.7) / $0.30 per packet) for M&Ms, which means $467.00 (467 packets * $1.00 per packet).