{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Solution to 8, 14 and 15

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

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

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 = =

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

View Full Document
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
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

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.

{[ snackBarMessage ]}

### Page1 / 19

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

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

View Full Document
Ask a homework question - tutors are online