Case study 1 a. Variable cost per passenger=$70.00 Full fare per passenger=$160.00 Contribution margin = $ 160- $ 70 = $ 90 per passenger Contribution margin ratio = $ 90/$160 = 56.25% Break-even point in passengers = Fixed costs/Contribution Margin = $ 3,150,000/$ 90 per passenger = 35,000 passengers Break-even point in dollars = Fixed Costs/Contribution Margin Ratio= $ 3,150,000/0.5625 = $ 5,600,000. b. Average load factor=70% of 90
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ACC403 - Principles of Accounting Module 2 – Case 2 One of the advantages of the discovery of mathematics is the birth of a systemic way of coming up into a generally accepted prediction based on facts and other factors and/or elements. With a set of rules being followed, this is what is normally called statistics. And in one way or another from it were devised a series of complex mathematical systems that tend to keep records of various activities – mostly business and financial ones. We
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a: What is the company’s contribution margin ratio? b: What is the company’s break-even point? (Give answer in dollars and in units.) 3. Jefferson Company reported $4,000,000 of sales during the month and incurred variable expenses totaling $2,800,000 and fixed expenses totaling $720,000. A total of 80,000 units were produced and sold last month. The company has no beginning or ending inventories. a: What is the company’s total contribution margin and contribution margin per unit? b: How many
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equation method. 2. solve for the company’s break even point in sales dollars using the equation method and the CM ratio. 3. solve for the company’s break even point in unit sales using the contribution margin method. 4. solve for the company’s break even point in sales dollars using the contribution margin method and the CM ratio. Solution: 1- Sales = Variable expenses + Fixed expenses + Profits 15 Q = 12 Q + 4200 + 0 3 Q = 4200 Q = 4200 / 3 Q = 1400 Unit 2- X
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nights Contribution margin from question 1 or Average Revenue – Variable Cost per Unit = = $20.94 - $2.54 = $18.4 Loss: 80 – 72 = 8 rooms x 34 weekend nights x $18.4 = $5,005 Profit: 72 rooms x 34 weekend nights x $5 increase in rates = $12,240 Difference = $12,240 - $5,005 = $7,235 (number if positive; therefore, we have a profit and we should add it to profit before taxes) Therefore, revised profit before taxed would be equal to $22,390 + $7,235 = $29,625 Question 3. Contribution Margin
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Solutions - Zeus Opticals a. Price Variable cost Unit contribution margin Allocated overhead Profit margin Eyepieces $53.00 30.00 23.00 25.50 $(2.50) Binoculars $ 78.00 45.00 33.00 32.30 $ 0.70 Camera Lens $160.00 118.00 42.00 35.70 $ 6.30 In this computation, notice that Zeus’s overhead rate is $17 per labor hour. We first compute the total number of hours as [(16,000 eyepieces × 1.5 hours/unit) + (20,000 binoculars × 1.9 hours/unit) + (3,000 lens× 2.1 hours/unit)]
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vases = 3 x 349 = 1250 BE figurines = 2 x 349 = 625 P4-30 Unit CM = 5,760,000/384,000 = $15 BE point = 3,000,000/15 = 200,000 units CM ratio = 15/50 =0.30 BE sales = 3,000,000/0.3 = $10,000,000 Or 50 x 200,000 = $10,000,000 Increased contribution margin (3,000,000 x 0.3) $900,000 Less : increased advertising expense 300,000 Increased profit $600,000 3) 945,000 x 0.3 = $283,500 4) We can simply focus on increased sales revenue to determine profitability because any increase
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ISD (340,000). As it is internally supplied the overall revenues for Zumwald would be 340,000. Variable costs would be ECD (9000), Heidelberg (50,000-21,600), ISD (26,300+72000). This would account to a total variable cost of 135,700. Hence the contribution would turn out to be 204,300.
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cuts come at a cost, however, and sales must increase considerably just to break even or make the price cuts profitable 1-P&G’s average contribution margin before the price cuts was 20 percent. Refer to Appendix 2 and calculate the new contribution margin if prices are reduced 10 percent. Average contribution margin before the price cuts = 20% Contribution Margin = price – variable cost / price Assume price is 100 0.2 = 100 – x/100 20 = 100 –x 20 + x = 100 X = 100 – 20 X = 80 (variable
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1. | |Make |Buy | | | |Silver Star |Alpha Products | |Circuit Board |2.00 | | | |Plastic Case |0.75 |
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