Mgmt 201 ch 7 questions

Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is currently $300​, but she has been given the option of changing the arrangements to $200 plus $0.25 for every unit of product sold from her stand. 1. At what point in sales volume will Rachel be indifferent between the two​ options? 2. If Rachel typically sells 700 units a​ month, which option will she​ prefer?

1. At what point in sales volume will RachelRachel be indifferent between the two​ options? Begin by selecting the equation to determine the indifference point. ​(Abbreviations used: FC​ = Fixed​ costs, VCU​ = Variable costs per​ unit.) (VCU (option 1) x Units) + FC (option 1) = (VCU (option 2) x Units) + FC (option 2) The indifference point is 400 units. ​(Round your answer to the nearest whole​ unit.) 2. If Rachel typically sells 700 units a​ month, which option will she​ prefer? Since Rachel​'s typical sales volume ​(700 ​units) is greater than the indifference point Rachel will prefer the current arrangement with the monthly fixed cost only .

Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is $300. Rachel​'s contribution margin per unit is $1.50 and contribution margin ratio is 75​%. 1. How many hot dogs does Rachel need to sell each month to​ breakeven? 2. How much sales revenue does Rachel need to generate each month to​ breakeven?

1. How many hot dogs does Rachel need to sell each month to​ breakeven? First identify the​ formula, then compute the breakeven points in units. ​(For amounts with a​ $0 balance, make sure to enter​ "0" in the appropriate​ cell.) (Fixed expenses+Operating income)/Contribution margin per unit= Breakeven units($300+$0)/$1.50=200 2. How much sales revenue does RachelRachel need to generate each month to​ breakeven? Enter the​ formula, then compute the breakeven point in sales dollars. ​(For amounts with a​ $0 balance, make sure to enter​ "0" in the appropriate​ cell.) (Operating income+Fixed expenses)/ Contribution margin ratio=Breakeven sales($0+$300)/ 75%=$400

Calendars imprints calendars with college names. The company has fixed expenses of $1,095,000 each month plus variable expenses of $6.50 per carton of calendars. Of the variable​ expense, 68​% is cost of goods​ sold, while the remaining 32​% relates to variable operating expenses. The company sells each carton of calendars for $16.50. Requirements 1. Compute the number of cartons of calendars that Team SpiritTeam Spirit Calendars must sell each month to breakeven. 2. Compute the dollar amount of monthly sales that the company needs in order to earn $308,000 in operating income​ (round the contribution margin ratio to two decimal​ places). 3. Prepare the​ company's contribution margin income statement for June for sales of 450,000 cartons of calendars. 4.What is​ June's margin of safety​ (in dollars)? What is the operating leverage factor at this level of​ sales? 5. By what percentage will operating income change if​ July's sales volume is 16​% ​higher? Prove your answer.

1. Sales revenue ( company sells each carton of calendsrs x # of cartons)-Variable expenses(variable expense of each per carton of calendars x # of cartons) -Fixed expenses =Operating income ~sales revenue per carton - variable expenses per carton = contribution margin per carton ~contribution margin per carton x number of cartons = fixed expenses ~fixed expenses/contribution margin per carton= number of cartons 1095000/(16.5-6.5)=109500 2. ~(fixed expenses + target operating income)/ contribution margin ratio = target sales in dollars ~contribution margin per carton/sales price per carton = contribution margin ratio (16.5-6.5)/16.5=.61 (1095000+308000)/.61= 2300000 3. Sales revenue(16.50x450,000): per show x shows variable expenses: cost of goods sold(6.50x450,000x68%): per show x shows x (cost of goods sold %) operating expenses(6.50x450,000x32%): per show x shows x (operating expenses %) contribution margin:4500000 fixed expenses:1095000 operating income-3405000 4.~ sales revenue - sales revenue at breakeven = margin of safety ( in dollars) a.k.a. sales revenue - ( sales price per carton x breakeven cartons) = margin safety in dollars ~ contribution margin/operating income = operating leverage factor 7425000-(16.5x109500)=5618250 4500000/3405000=1.322 5. sales volume x operating leverage factor = operating income increase 16%x1.322=.21152 original volume + increase in vlume = new volume 450,000+45000=495000x(16.5-6.5)=4950000-1095000=3855000-3405000=450000 ~450000/3405000

Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is $300. Rachel​'s contribution margin is $1.50 per hot dog sold. She has recently added individual servings of potatos chips to her product offering. Each bag of potato chips has a contribution margin of $0.75 per bag. Rachel sells 55 bags of potato chips for every 10 hot dogs. 1. What is Rachel​'s ​weighted-average contribution margin per​ unit? 2. How many total units much Rachel sell in a month to earn a target monthly profit of $900​? 3. Of the total units needed to earn $900 of​ profit, how many are hot dogs and how many are bags of potato​ chips?

1. What is RachelRachel​'s ​weighted-average contribution margin per​ unit? ​(Round the​ weighted-average contribution margin per unit to the nearest​ cent, ".XX".) Hotdogs Potato chips Total in "basket" Contribution margin per unit $1.50 $0.75 Multiply by: Sales mix (number of units in "basket") 10 5 15 Contribution margin $15.00 $3.75 $18.75 Weighted-average contribution margin per unit $1.25 2. How many total units much Rachel sell in a month to earn a target monthly profit of $900​? First identify the​ formula, then compute the breakeven point in units. ​(Enter decimals to two​ places, ".XX". Round your answer to the nearest​ unit.) (Operating income+Fixed expenses)/ Contribution margin per unit=Breakeven units ($900+$300)/$1.25=960 3. Of the total units needed to earn $900 of​ profit, how many are hot dogs and how many are bags of potato​ chips? First identify the​ formula, then compute the breakeven unit per item. Breakeven unitx (Sales mix sold/Total in "basket") = Breakeven unit per item Hot dog 960x (10/15) =640 Potato chips 960x (5/15) =320 Total units 960

Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is $300. Rachel spends $ 0.50$0.50 on each hot dog​ sold, including bun and condiments. She sells each hot dog for $2.00. 1. What is the contribution margin per​ unit? 2. What is the contribution margin​ ratio? 3. Predict operating income for a month in which Rachel sells 1,000 hot dogs.

1. What is the contribution margin per​ unit? First identify the​ formula, then compute the contribution margin per unit.​ (Enter amounts to two decimal​ places.) Sales price per unit- Variable cost per unit=Contribution margin per unit $2.00-$0.50=$1.50 2. What is the contribution margin​ ratio? First identify the​ formula, then compute the contribution margin ratio. ​(Enter the contribution margin ratio as a whole​ percent.) Contribution margin per unit/Sales price per unit =Contribution margin ratio $1.50/$2.00=75% 3. Predict operating income for a month in which Rachel sells 1,000 hot dogs. The forecasted operating income for a month in which Rachel sells 1,000 hot dogs is ​$1,200.

produces sport socks. The company has fixed expenses of $ 90 comma 000$90,000 and variable expenses of $ 0.90$0.90 per package. Each package sells for $ 1.80$1.80. The number of packages Sport ReadySport Ready needed to sell to earn anan $ 18 comma 000$18,000 operating income was 120 comma 000120,000 packages.packages. If Sport ReadySport Ready can decrease its variable costs to $ 0.80$0.80 per package by increasing its fixed costs to $ 105 comma 000$105,000​, how many packages will it have to sell to generate $ 18 comma 000$18,000 of operating​ income? Is this more or less than​ before? Why?

Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. (Fixed expenses+ Operating income) / Contribution margin per unit=Sales in units ​(Round your answer up to the nearest whole​ unit.) Sport Ready will have to sell 123,000 packages to generate $18,000 of operating income. Is this more or less than​ before? Why? Sport Ready would have to sell 3,000 more packages of socks to earn $18,000 of operating income. The increase in fixed costs was not completely offset by the decrease in variable costs at the prior target profit volumt of sales. Therefore, Sport Ready will need to sell more units in order to achieve its target profit level.

Sport Ready produces sports socks. The company has fixed expenses of $90,000 and variable expenses of $0.90 per package. Each package sells for $1.80. Requirements 1. Compute the contribution margin per package and the contribution margin ratio. 2. Find the breakeven point in units and in dollars. 3. Find the number of packages Sport Ready needs to sell to earn an $18,000 operating income.

Requirement 1. Compute the contribution margin per package and the contribution margin ratio. Begin by identifying the formula to compute the contribution margin per package. Then compute the contribution margin per package. ​(Enter the amount to the nearest​ cent.) Sales price per unit -Variable cost per unit =Contribution margin per unit The contribution margin per package is $ 0.90 . Compute the contribution margin ratio. ​(Enter the ratio as a whole​ percent.) Begin by identifying the formula to compute the contribution margin ratio. Contribution margin per unit/Sales price per unit =Contribution margin ratio The contribution margin ratio is 50%. Requirement 2. Find the breakeven point in units and dollars. Begin by identifying the formula to compute the breakeven sales in units using the contribution margin approach. (Operating income+ Fixed expenses) / Contribution margin per unit =Breakeven sales in units The breakeven point in units is 100,000 . Find the breakeven point in dollars using the contribution margin approach. Begin by identifying the formula to compute the breakeven point in dollars. (Operating income+ Fixed expenses) / Contribution margin ratio =Breakeven sales in dollars The breakeven point in dollars is $ 180,000 . Requirement 3. Find the number of packages Sport ReadySport Ready needs to sell to earn anan ​$18,000 operating income. The number of packages to achieve an operating income of $18,000 is 120,000 .

UllieUllie Medical Supply is a retailer of home medical equipment. Last​ year, UllieUllie​'s sales revenues totaled $ 6 comma 800 comma 000$6,800,000. Total expenses were $ 2 comma 600 comma 000$2,600,000. Of this​ amount, approximately $ 1 comma 088 comma 000$1,088,000 were​ variable, while the remainder were fixed. Since UllieUllie​'s offers thousands of different​ products, its managers prefer to calculate the breakeven point in terms of sales dollars rather than units. Requirements 1. What is UllieUllie​'s current operating​ income? 2. What is UllieUllie​'s contribution margin​ ratio? 3. What is the​ company's breakeven point in sales​ dollars? ​(​Hint: The contribution margin ratio calculated in Requirement 2 is already weighted by the​ company's actual sales​ mix.) 4. UllieUllie​'s top management is deciding whether to embark on a $ 250 comma 000$250,000 advertising campaign. The marketing firm has projected annual sales volume to increase by 1414​% as a result of this campaign. Assuming that the projections are​ correct, what effect would this advertising campaign have on the​ company's annual operating​ income?

Requirement 1. What is UllieUllie​'s current operating​ income? Begin by identifying the formula to compute the operating income. Sales revenue- Variable expenses- Fixed expenses= Operating income The operating income is $ 4,200,000 . Requirement 2. What is UllieUllie​'s contribution margin​ ratio? Begin by identifying the formula to compute the contribution margin ratio. Contribution margin/ Sales revenue= Contribution margin ratio ​(Enter the ratio as a whole​ percent.) The contribution margin ratio is 84%. Requirement 3. What is the​ company's breakeven point in sales​ dollars? ​(​Hint: The contribution margin ratio calculated in Requirement 2 is already weighted by the​ company's actual sales​ mix.) Begin by identifying the formula to compute the breakeven point in sales dollars. (Operating income+ Fixed expenses) / Contribution margin ratio =Breakeven sales in dollars ​(Round your answer up to the nearest whole​ dollar.) The breakeven point in sales dollars is $ 1,800,000 . Requirement 4. UllieUllie​'s top management is deciding whether to embark on a $ 250 comma 000$250,000 advertising campaign. The marketing firm has projected annual sales volume to increase by 1414​% as a result of this campaign. Assuming that the projections are​ correct, what effect would this advertising campaign have on the​ company's annual operating​ income? If Ullie embarks on this advertising campaign, sales revenue and variable costs will rise by 14%, which will cause the contribution margin toincrease by14 %. However, fixed costs will rise by $250,000 due to the advertising. The effect would be an increase in operating income of $ 549,680 .

A traveling production of Fiddler on the RoofFiddler on the Roof performs each year. The average show sells 1,200 tickets at $55 per ticket. There are 115 shows each year. The show has a cast of 60​, each earning an average of $320 per show. The cast is paid only after each show. The other variable expense is program printing costs of $9 per guest. Annual fixed expenses total $1,224,000. Requirements 1.Compute revenue and variable expenses for each show. 2.Use the income statement equation approach to compute the number of shows needed annually to breakeven. 3.Use the shortcut unit contribution margin approach to compute the number of shows needed annually to earn a profit of $3,888,000 Is this goal​ realistic? Give your reason. 4.Prepare Fiddler on the RoofFiddler on the Roof​'s contribution margin income statement for 115 shows each year. Report only two categories of​ expenses: variable and fixed.

Sales price per ticket x Number of tickets =Revenue per show 1200*55=66000 Variable expenses per show: Programs 1,200(# of guests) x $9 (per guest) $10800 Cast: 60 (# of cast members) x $320 per cast member 19200 Total variable expenses per show: $30000 ~Number of shows = Fixed expenses / Contribution margin per show ~ Contribution margin per show x Number of shows =Fixed expenses ~Sales revenue for show - variable expenses per show = contribution margin per show ~Sales revenue- Variable expenses-Fixed expenses =Operating income 66000-30000=36000 1224000/36000=34 (Fixed expenses+ Operating income) / Contribution margin per show=Target # of shows Contribution Margin Income Statement Year Ended December 31 Now you can complete the contribution margin income statement. Be sure to calculate the sales revenue and the variable expenses for the number of show to be performed. Hairspray Contribution Margin Income Statement Year Ended December 31 Sales revenue: 6,600,000 Variable expenses: -3,000,000 Contribution margin: 3,600,000 Fixed expenses: -1224,000 Operating income (loss) sales revenue= revenue per show times shows each year variable expenses=variable expenses per show times shows each year