Sam runs his own sandwich truck on the U of C campus. The monthly cost of the truck and necessary campus permit is $1,428. Sam spends $5.04 on each sandwich sold, including all of the ingredients, condiments, and paper products. He sells each sandwich for $8.40
Predict operating income for a month in which Sam sell 2,880 sandwiches
Total contribution margin
Operating income

Let's break down the problem to compute the **operating income** and **total contribution margin** for Sam.

### 1. Contribution Margin (CM) Per Sandwich:
Contribution margin per sandwich is the difference between the selling price and the variable cost (the cost per sandwich).
\[
\text{CM per sandwich} = \text{Selling price} - \text{Variable cost} 
\]
\[
\text{CM per sandwich} = 8.40 - 5.04 = 3.36
\]

### 2. Total Contribution Margin:
Total contribution margin is the contribution margin per sandwich multiplied by the total number of sandwiches sold.
\[
\text{Total CM} = \text{CM per sandwich} \times \text{Number of sandwiches sold}
\]
\[
\text{Total CM} = 3.36 \times 2880 = 9,676.80
\]

### 3. Fixed Costs:
Sam has a fixed monthly cost of $1,428 (truck and campus permit).

### 4. Operating Income:
Operating income is calculated by subtracting the fixed costs from the total contribution margin.
\[
\text{Operating Income} = \text{Total CM} - \text{Fixed Costs}
\]
\[
\text{Operating Income} = 9,676.80 - 1,428 = 8,248.80
\]

### Summary:
- **Total Contribution Margin:** $9,676.80
- **Operating Income:** $8,248.80

Would you like further details or have any questions about the steps?

Here are 5 questions to expand on the topic:
1. How would the operating income change if the fixed costs increased by 10%?
2. What would be the breakeven point in terms of sandwiches sold?
3. How does contribution margin analysis help in decision-making?
4. What happens to operating income if the variable cost per sandwich rises to $6?
5. How would a 15% increase in sandwich sales affect the total contribution margin?

**Tip:** Understanding contribution margin helps determine how much of each sale contributes to covering fixed costs and generating profit.

Sam runs his own sandwich truck on the U of C campus. The monthly cost of the truck and necessary campus permit is $1,428. Sam spends $5.04 on each sandwich sold, including all of the ingredients, condiments, and paper products. He sells each sandwich for $8.40. Predict operating income for a month in which Sam sells 2,880 sandwiches.

Learn how to predict the operating income and total contribution margin for Sam's sandwich truck business. This problem involves analyzing fixed and variable costs and applying algebraic formulas to calculate Sam's monthly profit. Suitable for students in Grades 9-12.

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