Chapter 7 Problem Solutions

# Chapter 7 Problem Solutions - Chapter 7Solutions to...

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

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

View Full Document

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 7Solutions to Problems Problem 1: Solution 1. Selling price - Variable cost per unit = Contribution margin \$12.00 - \$8.00 = \$4.00 Contribution margin / Selling price = Contribution margin ratio \$4.00 / \$12.00 = .333 2. Selling price - Variable cost per unit = Contribution margin \$11.00 - \$7.75 = \$3.25 Contribution margin / Selling price = Contribution margin ratio \$3.25 / \$11.00 = .295 3. Total fixed cost / (Selling price - Variable cost per unit) = Units sold \$200.00 / (\$11.00 - \$7.75) = 62 lunch covers Problem 2: Solution 1. Total fixed cost / (Selling price - Variable cost per unit) = Units sold at breakeven \$100,000 / (\$80 - \$15) = 1,539 rooms 2. Rooms sold to break even / Rooms sold per day = Day breakeven occurs 1,539 / 60 = 25.65 or the 26th day 3. Annual fixed costs increase / 12 months = Monthly fixed costs increase \$72,000 / 12 = \$6,000 Total fixed costs / (Selling price - Variable cost per unit) = Units sold at breakeven \$106,000 / (\$80 - \$12) = 1,559 rooms Units sold at breakeven Selling price = Breakeven revenues 1,559 \$80 = \$124,720 Chapter 7Solutions to Problems Problem 3: Solution Transportation costs are fixed only on a daily basis. Treat this as a variable cost at \$.02 per glass. 1. Cost per drink + Other variable costs = Total variable cost per unit \$.20 + \$.05 + \$.02 = \$.27 Selling price - Variable cost per unit = Contribution margin \$.75 - \$.27 = \$.48 2. Total fixed cost / (Selling price - Variable cost per unit) = Units sold at breakeven \$750 / (\$.75 - \$.27) = 1,563 lemonades 3. Lemonades sold to break even / Lemonades sold per day = Day breakeven occurs 1,563 / 75 = 20.84 or the 21st day or Monday, June 29. Problem 4: Solution 1. Mixed Low Month High Month Variable Costs Variable Costs Fixed Costs 60% Occ. 80% Occ. per 1% Occ. Per Room Costs Repairs \$3,000 \$3,500 \$25 \$0.83 \$1,500 Utilities \$4,000 \$5,000 \$50 \$1.67 \$1,000 Variable cost per room: \$20 + \$.83 + \$1.67 = \$22.50 2. Monthly fixed costs: \$100,000 + \$1,500 + \$1,000 = \$102,500 3. Day breakeven occurs = Rooms sold to break even / Rooms sold per day 25 = X / 75 X = 1,875 rooms sold to break even (Total fixed costs / Units sold) + Variable cost per unit = Selling price at breakeven (\$102,500 / 1,875) + \$22.50 = \$77.17 Problem 5: Solution 1. Fixed costs = (1-VC%) Sales 550,000 = .8 Sales Sales = 687,500 2. Required return = investment ROI = 1,500,000 .2 = 300,000 Chapter 7Solutions to Problems Problem 6: Solutions 1. a. Breakeven Point CMRw = ((60/100) ((60 - 12)/60)) + ((40/100) ((40 - 20)/40)) CMRw = 0.68 R = \$410,000/.68 Breakeven Point = \$602,941.18 b. NI Variable Expense % Rooms = \$120,000/\$600,000 = 0.2 Variable Expense % Coffee Shop = \$200,000/\$400,000 = 0.5 Calculations Rooms Sales \$720,000 .6(1,200,000) Coffee Shop Sales 480,000 .4(1,200,000) Variable Expense Rooms 144,000 .2(720,000) Variable Expense C.S.Variable Expense C....
View Full Document

## Chapter 7 Problem Solutions - Chapter 7Solutions to...

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

View Full Document
Ask a homework question - tutors are online