chapter_3

c h a p 39060 i n p a r t o n e total variable

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Unformatted text preview: rovided the following information for the first year of operations: Organizing Yourself for Success in College Sales Beer sales (40% of total sales) . . . . . . . . . . . . . . . . . . $ 781,200 Food sales (55% of total sales) . . . . . . . . . . . . . . . . . . 1,074,150 Other sales (5% of total sales) . . . . . . . . . . . . . . . . . . . 97,650 Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,953,000 Variable Costs Beer (15% of beer sales) . . . . . . . . . . . . . . . . . . . . . . . $ 117,180 Food (35% of food sales) . . . . . . . . . . . . . . . . . . . . . . . 375,953 Other (33% of other sales) . . . . . . . . . . . . . . . . . . . . . . 32,225 Wages of employees (25% of sales) . . . . . . . . . . . . . . 488,250 Supplies (1% of sales) . . . . . . . . . . . . . . . . . . . . . . . . . 19,530 Utilities (3% of sales) . . . . . . . . . . . . . . . . . . . . . . . . . . 58,590 TERS Other: credit card, misc. (2% of sales) . . . . . . . . . . . . . C H A P 39,060 I N P A R T O N E Total variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . $1,130,788 Contribution margin . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 822,212 1 Making Yourself Successful in College Fixed Costs Salaries: manager, chef, brewer . . . . . . . . . . . . . . . . . $ 140,000 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 2 Approaching College Reading and Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Other: cleaning, menus, misc. . . . . . . . . . . . .Developing a College-Level Vocabulary ....... 40,000 Insurance and accounting . . . . . . . . . . . . . . . . . . . . . . 40,000 Property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000 Depreciation . . . . . . . . . . . . . . . . . . . . . .3 . . .Approaching College Assignments: . ....... 94,000 Reading Textbooks and Following Directions 132,000 Debt service (interest on debt) . . . . . . . . . . . . . . . . . . . Total fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 520,000 Operating profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302,212 Required a. What were potential investors and financial institutions concerned with when asking the ques- Resources ✓ Related tions listed in the case? See pages 000 to 000 b. Why was the first financial model prepared by RBC inappropriate for answering most of the of the Annotated Instructor’s questions asked by investors and bankers? Be specific. Edition for general suggesc. If you were deciding whether to invest in RBC, how would you quickly check the reasonable- to the chapters tions related ness of RBC’s projected operating profit? in Part One. d. Why is the question “How much does a pint of beer cost to produce?” difficult to answer? e. Perform sensitivity analysis by answering the following questions. 1. 2. 3. 4. cor50782_ch01_001-072.indd 1 lan27114_ch03_080-109.indd lan27114_ch03_080-109.indd 108 What is the break-even point in sales dollars for RBC? What is the margin of safety for RBC? Why can’t RBC find the break-even point in units? What sales dollars would be required to achieve an operating profit of $200,000? $500,000? What assumptions are made in this calculation? (© Kurt Heisinger, 2009) 1 10/5/09 11:09:29 PM 10/22/09 10:34:04 PM REVISED PAGES Chapter 3 Fundamentals of Cost-Volume-Profit Analysis Solutions to Self-Study Questions 1. PART a. Operating profit: Profit b. PX VX $360,000 $60,000 $60,000 F ______ PV $60,000 ($90 $55 Target volume in units: Profit X 1 Orientation Break-even point: X c. F $240,000 109 $5) $60,000 $30 Preparing and Organizing Yourself for Success in College $120,000 F Target profit _______________ P V ($60,000 $120,000) d. Target volume in sales dollars: Profit $30 6,000 units $20,000 Contribution margin ratio PX 2,000 units $30 $90 .333 (rounded) F Target profit _____________________ Contribution margin ratio ($60,000 $20,000) .333 $240,000 e. Number of units sold in March X $360,000 $90 4,000 units f. Number of units sold to produce an operating profit of 20 percent of sales C HAPTERS IN PART ONE PX VX F 20%PX 1M $90X $60X (20%)($90)X $60,000 aking Yourself Successful in College ($90 $60 $18)X $60,000 X $60,000 $12 5,000 units 2 Approaching College Reading and 2. 3. After-tax profits $48,750 $48,750 ($48,750 .65) $75,000 $60,000 $8X X X Developing a College-Level Vocabulary [(P V )X F ](1 t) [($15 $7)X $60,000](1 .35) ($8X $60,000)(.65) 3 Approaching College Assignments: $8X $60,000 Reading Textbooks and Following Directions $8X $135,000 $135,000 $8 16,875 units Based on the current mix of tent spaces and RV spaces, the sales mix at HDC is 40% ( 6,000 15,000) tent spaces and 60% ( 9,000 15,000) RV spaces. The weighted-average contribution margin for HDC is: .40 ($6 $3) .60 ($15 $7) $6 The multiple-product break-even point can be determined by the break-even formula: X Fixed costs Weighted-average contribution margin per unit $60,000 $6 10,000 units At the current sales mix, this would be 4,000 tent spaces (40% of 10,000 units) and 6,000 RV spaces (60% of 10,000 units). cor50782_ch01_001-072.indd 1 lan27114_ch03_080-109.indd 109 ✓ Related Resources See pages 000 to 000 of the Annotated Instructor’s Edition for general suggestions related to the chapters in Part One. 1 10/5/09 11:09:29 PM 10/22/09 10:34:04 PM...
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This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at Arizona.

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