To determine how much the vendor is contributing to covering his fixed costs or generating profits for each hotdog sold, we need to calculate the total variable costs and the monthly fixed costs. Then, we'll subtract the total variable costs from the selling price of the hotdog to find the contribution margin.
1. Fixed Costs:
The fixed costs are the monthly expenses:
- Food truck rent: $31.00
- Electricity: $23.00
- Other expenses: $15.00
Total fixed costs = $31.00 + $23.00 + $15.00 = $69.00
2. Variable Costs (per hotdog):
The variable costs include the costs incurred for each hotdog:
- Raw material cost: $12.26
- Packing cost: $1.20
Total variable costs per hotdog = $12.26 + $1.20 = $13.46
3. Selling Price of Each Hotdog:
The selling price of each hotdog is $17.00.
4. Contribution Margin (per hotdog):
To find how much the vendor contributes towards fixed costs and profits, subtract the total variable costs from the selling price:
Contribution margin per hotdog = Selling price - Variable costs
= $17.00 - $13.46 = $3.54
5. Total Contribution to Fixed Costs:
The contribution to fixed costs or profits is $3.54 per hotdog sold.
Summary:
For each hotdog sold, the vendor contributes $3.54 to cover his fixed costs and generate profits after considering the variable costs.