Cost managemnet Chapter 3

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Georgia Institute Of Technology *

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FINANCIAL

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Industrial Engineering

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Feb 20, 2024

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docx

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4

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Chapter 3 Belterra Tiles makes tiles for flooring and other applications. The CFO of the company provides you with the following information for the period October through December, the company's third quarter: Belleterre Tile Revenues and Costs Third Quarter Total quantity sold 126,100 tiles Total revenues $ 469,092   Total variable costs 360,646   Total fixed costs 103,200   Required: a. What is the average selling price per tile? Note: Round your final answer to 2 decimal places. b. What is the average variable cost per tile? Note: Round your final answer to 2 decimal places. c. What is the average contribution margin per tile? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. d. What is the current operating profit for a quarter? Note: Do not round intermediate calculations. e. What is the break-even point? Note: Do not round intermediate calculations. f. The CFO tells you that the company owners have said that unless the quarterly operating profit exceeds $17,372, they will liquidate the company. How many tiles would have to be sold in a quarter for Belleterre Tile to earn $17,372 in quarterly operating profit? Note: Do not round intermediate calculations. Explanation a. $469,092 ÷ 126,100 tiles = $3.72 per tile b. $360,646 ÷ 126,100 tiles = $2.86 per tile c. ($3.72 − $2.86) = $0.86 per tile d. Profit = ($3.72 − $2.86) × 126,100 tiles − $103,200 = $5,246 e. Profit = ($3.72 − $2.86) × 126,100 tiles − $103,200 Let Profit = 0 0 = ($3.72 − $2.86)X − $103,200 X = $103,200 / $0.86 X = 120,000 tiles f. Let Profit = $17,372
$15,000 = ($3.72 − $2.86)X − $103,200 X = ($103,200 + $17,372) / $0.86 X = 140,200 tiles Waterman’s WaterWorld Tourist Park has collected the following data for operations for the year: Total revenues $ 2,900,000 Total fixed costs $ 947,375 Total variable costs $ 1,575,000 Total tickets sold 50,000 Required: a. What is the average selling price for a ticket? b. What is the average variable cost per ticket? c. What is the average contribution margin per ticket? Note: Do not round intermediate calculations. d. What is the break-even point? Note: Do not round intermediate calculations. e. Waterman's management has decided that unless the operation can earn at least $212,000 in operating profits, they will close it down. What number of tickets must be sold for Waterman's to make a $212,000 operating profit for the year on ticket sales? Note: Do not round intermediate calculations. Explanation a. $2,900,000 ÷ 50,000 tickets = $58.00 per ticket b. $1,575,000 ÷ 50,000 tickets = $31.50 per ticket c. ($58.00 − $31.50) = $26.50 per ticket d. Profit = ($58.00 − $31.50) X − $947,375 Let Profit = 0 0 = ($58.00 − $31.50) X − $947,375 X = $947,375 / $26.50 X = 35,750 tickets e. Let Profit = $212,000 $212,000 = ($58.00 − $31.50)X − $947,375 X = ($947,375 + $212,000) / $26 X = 43,750 tickets
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