ch06 - SOLUTIONS TO EXERCISESSET B EXERCISE 6-1B (a) (1)...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
SOLUTIONS TO EXERCISES—SET B EXERCISE 6-1B (a) (1) Contribution margin per room = $50 – ($5 + $30) Contribution margin per room = $15 Contribution margin ratio = $15 ÷ $50 = 30% Fixed costs = $10,000 + $2,000 + $1,000 + $500 = $13,500 Break-even point in rooms = $13,500 ÷ $15 = 900 (2) Break-even point in dollars = 900 rooms X $50 per room = $45,000 per month OR Fixed costs ÷ Contribution margin ratio = $13,500 ÷ .30 = $45,000 per month (b) (1) Margin of safety in dollars: Planned activity = 40 rooms per day X 30 days = 1,200 rooms per month Expected rental revenue = 1,200 rooms X $50 = $60,000 Margin of safety in dollars = $60,000 – $45,000 = $15,000 (2) Margin of safety ratio: $15,000 = 25% $60,000 EXERCISE 6-2B (a) Contribution margin (in dollars): Sales = (2,700 X $30) = $81,000 Variable costs = $81,000 X .60 = 48,600 Contribution margin $32,400 Variable cost (per unit): $30 X .60 = $18. Contribution margin (per unit): $30 – $18 = $12. Contribution margin (ratio): $12 ÷ $30 = 40%. © 2008 For Instructor Use Only 6-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
EXERCISE 6-2B (Continued) (b) Breakeven sales (in dollars): $2 6 ,0 00 40 = $65,000. Breakeven sales (in units): $2 6 ,0 00 $1 2 = 2,167 units (rounded). (c) Margin of safety (in dollars): $81,000 – $65,000 = $16,000. Margin of safety (ratio): $16,000 ÷ $81,000 = 20% (rounded). EXERCISE 6-3B 1. Unit sales price = $300,000 ÷ 5,000 units = $60 Increase selling price to $66, or ($60 X 110%). Net income = $330,000 – $210,000 – $70,000 = $50,000. 2. Reduce variable costs to 65% of sales. Net income = $300,000 – $195,000 – $70,000 = $35,000. 3. Reduce fixed costs to $60,000, or ($70,000 – $10,000). Net income = $300,000 – $210,000 – $60,000 = $30,000. Alternative 1, increasing selling price, will produce the highest net income. EXERCISE 6-4B (a) (1) Contribution margin ratio is: $26,400 = 55% $48,000 Break-even point in dollars = $22,000 = $40,000 55% (2) Round-trip fare = $48,000 = $160 300 fares Break-even point in fares = $40,000 = 250 fares $160 EXERCISE 6-4B (Continued) © 2008 For Instructor Use Only 6-2
Background image of page 2
(b) At the break-even point fixed costs and contribution margin are equal. Therefore, the contribution margin at the break-even point would be $22,000. (c) Fare revenue ($144* X 375**) $54,000 Variable costs ($21,600 X 1.25) 27,000 Contribution margin 27,000 Fixed costs 22,000 Net income $ 5,000 Yes, the fare decrease should be implemented because net income increases to $5,000. *$160 – (.10 X $160) **300 + 75 EXERCISE 6-5B KOUFAX COMPANY CVP Income Statement (Current) For the Year Ended December 31, 2008 Total Per Unit Sales (60,000 X $25). ............................................. $1,500,000 $25 Variable expenses (60,000 X $12). ...................... 720,000 12 Contribution margin. ............................................ 780,000 $13 Fixed expenses. .................................................... 550,000 Net income. ............................................................ $ 230,000 © 2008 For Instructor Use Only 6-3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/12/2009 for the course ACCT 2102 taught by Professor Constable,d during the Fall '08 term at Georgia Perimeter.

Page1 / 34

ch06 - SOLUTIONS TO EXERCISESSET B EXERCISE 6-1B (a) (1)...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online