E6-1 The San Marcos Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $50 a night. Operating costs are as follows: Costs Amount Salaries $8,500 per month Utilities 2,000 per month Depreciation 1,000 per month Maintenance 500 per month Maid service 5 per room Other costs 33 per room
(a) Determine the inn’s break-even point in 1. Number of rented rooms per month and 2. Dollars
(b) If the inn plans on renting an average of 50 rooms per day (assuming a 30-day month), what is 1. The monthly margin of safety in dollars and 2. The margin of safety ratio
Click here for the solution: (BA 225) The San Marcos Inn is trying to determine its break-even point
Showing posts with label break-even point. Show all posts
Showing posts with label break-even point. Show all posts
Wednesday, April 13, 2016
Friday, August 21, 2015
Discuss how the following affect the break-even point
Discuss how the following affect the break-even point: increase or decrease in unit sales price, increase or decrease in variable cost per unit, increase or decrease in fixed costs.
Click here for the solution: Discuss how the following affect the break-even point
Click here for the solution: Discuss how the following affect the break-even point
Wednesday, June 17, 2015
Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Problem 11-28 Determining the Break-even Point and Preparing a Contribution Margin Income Statement
Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.
a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Blackmon Manufacturing Company makes a product that it sells for $50 per unit. The company incurs variable manufacturing costs of $14 per unit. Variable selling expenses are $6 per unit, annual fixed manufacturing costs are $189,000, and fixed selling and administrative costs are $141,000 per year.
a. Determine the break even point in units and dollars
b. Confirm your results by preparing a contribution margin income statement for the break-even sales volume.
Check:
a. 11,000 units
Click here for the solution: Blackmon Manufacturing Company makes a product that it sells for $50 per unit
Saturday, May 9, 2015
ACC 561 Question 2-61, CVP in a Modern Manufacturing Company
ACC 561
4. Individual Assignment: Practice Text Exercises
• Complete the following problem sets from the Introduction to Management Accounting text:
Question 2-61, CVP in a Modern Manufacturing Company, on p. 87
A division of Hewlett-Packard Company changed its production operations
from one where a large labor force assembled electronic components to
an automated production facility dominated by computer-controlled
robots. The change was necessary because of fierce competitive
pressures. Improvements in quality, reliability, and flexibility of
production schedules were necessary just to match competition. As a
result of the change, variable costs fell and fixed costs increased, as
shown in the following assumed budgets:4. Individual Assignment: Practice Text Exercises
• Complete the following problem sets from the Introduction to Management Accounting text:
Question 2-61, CVP in a Modern Manufacturing Company, on p. 87
Old Production Operation Old Production Operation
Unit variable cost
Material $0.88 $0.88
Labor $1.22 0.22
Total per unit $2.10 $1.10
Monthly fixed costs
Rent and depreciation 450,000.00 $875,000.00
Supervisory labor 80,000.00 175,000.00
Other 50,000.00 90,000.00
Total per month $580,000.00 $1,140,000.00
Expected volume is 600,000 units per month, with each unit selling for $3.10 Capacity is 800,000 units.
1. Compute the budgeted profit as the expected volume of 600,000 units under both the old and the new production environments.
2. Compute the budgeted break-even point under both the old and the new production environments.
3 .Discuss the effect on profits if volume falls to 500,000 units under both the old and the new production environments.
4 .Discuss the effect on profits if volume increases to 700,000 units under both the old and the new production environments.
5 .Comment on the riskiness of the new operation versus the old operation.
Click here for the solution: ACC 561 Question 2-61, CVP in a Modern Manufacturing Company
Sunday, April 26, 2015
(Research and Application 5-34: Benetton Group) The questions in this exercise are based on the Benetton Group, a company headquartered in Italy and known in the United States
Research and Application 5-34
Benetton Group
The questions in this exercise are based on the Benetton Group, a company headquartered in Italy and known in the United States primarily for one of its brands of fashion apparel?United Colors of Benetton. To answer the questions, you will need to download the Benetton Group's 2004 Annual Report at www.benetton.com/investors. You do not need to print this document to answer the questions.
Required:
1. How do the formats of the income statements shown on pages 33 and 50 of Benetton's annual report differ from one another (disregard everything beneath the line titled “income from operations”)? Which expenses shown on page 50 appear to have been reclassified as variable selling costs on page 33?
2. Why do you think cost of sales is included in the computation of contribution margin on page 33?
3. Perform two separate computations
of Benetton's break-even point in euros. For the first computation, use data from 2003. For the second computation, use data from 2004. Why do the numbers that you computed differ from one another?
4. What sales volume would have been necessary in 2004 for Benetton to attain a target income from operations of €300 million?
5. Compute Benetton's margin of safety using data from 2003 and 2004. Why do your answers for the two years differ from one another?
6. What is Benetton's degree of operating leverage in 2004? If Benetton's sales in 2004 had been 6% higher than what is shown in the annual report, what income from operations would the company have earned? What percentage increase in income from operations does this represent?
7. What income from operations would Benetton have earned in 2004 if it had invested €10 million additional euros in advertising and promotions and realized a 3% increase in sales? As an alternative, what income from operations would Benetton have earned if it not only invested €10 million additional euros in advertising and promotions but also raised its sales commission rate to 6% of sales, thereby generating a 5% increase in sales? Which of these two scenarios would have been preferable for Benetton?
8. Assume that total sales in 2004 remained unchanged at €1,686 million (as shown on pages 33 and 50); however, the Casual sector sales were €1,554 million, the Sportswear and Equipment sector sales were €45million, and the Manufacturing and Other sector sales were €87 million. What income from operations would Benetton have earned with this sales mix? (Hint: look at pages 36 and 37 of the annual report.) Why is the income from operations under this scenario different from what is shown in the annual report?
The questions in this exercise are based on the Benetton Group, a company headquartered in Italy and known in the United States primarily for one of its brands of fashion apparel?United Colors of Benetton. To answer the questions, you will need to download the Benetton Group's 2004 Annual Report at www.benetton.com/investors. You do not need to print this document to answer the questions.
Required:
1. How do the formats of the income statements shown on pages 33 and 50 of Benetton's annual report differ from one another (disregard everything beneath the line titled “income from operations”)? Which expenses shown on page 50 appear to have been reclassified as variable selling costs on page 33?
2. Why do you think cost of sales is included in the computation of contribution margin on page 33?
3. Perform two separate computations
of Benetton's break-even point in euros. For the first computation, use data from 2003. For the second computation, use data from 2004. Why do the numbers that you computed differ from one another?
4. What sales volume would have been necessary in 2004 for Benetton to attain a target income from operations of €300 million?
5. Compute Benetton's margin of safety using data from 2003 and 2004. Why do your answers for the two years differ from one another?
6. What is Benetton's degree of operating leverage in 2004? If Benetton's sales in 2004 had been 6% higher than what is shown in the annual report, what income from operations would the company have earned? What percentage increase in income from operations does this represent?
7. What income from operations would Benetton have earned in 2004 if it had invested €10 million additional euros in advertising and promotions and realized a 3% increase in sales? As an alternative, what income from operations would Benetton have earned if it not only invested €10 million additional euros in advertising and promotions but also raised its sales commission rate to 6% of sales, thereby generating a 5% increase in sales? Which of these two scenarios would have been preferable for Benetton?
8. Assume that total sales in 2004 remained unchanged at €1,686 million (as shown on pages 33 and 50); however, the Casual sector sales were €1,554 million, the Sportswear and Equipment sector sales were €45million, and the Manufacturing and Other sector sales were €87 million. What income from operations would Benetton have earned with this sales mix? (Hint: look at pages 36 and 37 of the annual report.) Why is the income from operations under this scenario different from what is shown in the annual report?
Click here for the solution: (Research and Application 5-34: Benetton Group)
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