Chapter 7 Problem Solutions

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

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

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