Solution to 8, 14 and 15

Solution to 8, 14 and 15 - EXERCISE 8-25 2. Stadium...

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EXERCISE 8-25 2. Stadium capacity. .......................................... 6,000 Attendance rate. ............................................. × 2/3 Attendance per game. .................................... 4,000 The team must play 5 games to break even. PROBLEM 8-35 (30 MINUTES) 1. units 135,000 $19.80 $25.00 $702,000 margin on contributi unit costs fixed units) (in point even - Break = - = = 2. $3,375,000 $25.00 $19.80 $25.00 $702,000 ratio margin - on contributi cost fixed dollars) sales (in point even - Break = - = = 3. Number of sales units required to earn target net profit units 210,000 $19.80 $25.00 $390,000 $702,000 margin on contributi unit profit net target costs fixed = - + = + = 4. Margin of safety = budgeted sales revenue – break-even sales revenue = (140,000)($25) – $3,375,000 = $125,000 5. Break-even point if direct-labor costs increase by 10 percent: New unit contribution margin = $25.00 – $8.20 – ($4.00)(1.10) – $6.00 – $1.60 = $4.80 5 4,000 20,000 game per Attendance (tickets) point even - Break = =
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Break-even point units 146,250 $4.80 $702,000 margin on contributi unit new costs fixed = = = 6. Contribution margin ratio price sales margin on contributi unit = Old contribution-margin ratio .208 $25.00 $19.80 $25.00 = - = Let P denote sales price required to maintain a contribution-margin ratio of .208. Then P is determined as follows: (rounded) $25.51 $20.20 .792 .208 $20.20 .208 $1.60 $6.00 10) ($4.00)(1. $8.20 = = = - = - - - - P P P P P P Check: New contribution- margin ratio (rounded) .208 $25.51 $1.60 $6.00 10) ($4.00)(1. $8.20 $25.51 = - - - - = PROBLEM 8-38 (25 MINUTES) 1. Closing of mall store: Loss of contribution margin at Mall Store. ............................................. $(108,000) Savings of fixed cost at Mall Store (75%). ............................................. 90,000 Loss of contribution margin at Downtown Store (10%). ........................ (14,400 ) Total decrease in operating income. ....................................................... $ (32,400 ) 2. Promotional campaign: Increase in contribution margin (10%). .................................................. $10,800
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Increase in monthly promotional expenses ($180,000/12). .................... (15,000 ) Decrease in operating income. ............................................................... $(4,200 ) 3. Elimination of items sold at their variable cost: We can restate the November 20x4 data for the Mall Store as follows: Mall Store Items Sold at Their Variable Cost Other Items Sales. .......................................................................... $180,000* $180,000* Less: variable expenses. .............................................. 180,000 72,000 Contribution margin. .................................................. $ -0 - $108,000 If the items sold at their variable cost are eliminated, we have: Decrease in contribution margin on other items (20%). ....................... $ (21,600) Decrease in fixed expenses (15%). ....................................................... 18,000
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This note was uploaded on 02/29/2012 for the course E 101 taught by Professor Sfere during the Spring '12 term at Abilene Christian University.

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Solution to 8, 14 and 15 - EXERCISE 8-25 2. Stadium...

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