CVP and Margin of Safety Bristol Car Service offers airport service in a mid-size city. Bristol charges $50 per trip to or from the airport. The variable cost for a trip totals S12, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is S2,736. Required 1-How many trips must Bristol sell every month to break even? 2-Bristol's owner believes that 90 trips is a reasonable forecast of the average monthly demand.What is the margin of safety in terms of the number of airport trips!

CVP and Margin of Safety Bristol Car Service offers airport service in a mid-size city. Bristol charges $50 per trip to or from the airport. The variable cost for a trip totals S12, for fuel, driver, and so on. The monthly fixed cost for Bristol Rainbow Tours is S2,736. Required 1-How many trips must Bristol sell every month to break even? 2-Bristol's owner believes that 90 trips is a reasonable forecast of the average monthly demand.What is the margin of safety in terms of the number of airport trips!

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6CE

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Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
Northampton City Tours (NCT) offers personalized historical and architectural tours in a large midwestern city and the local suburbs. NCT charges $350.00 per trip to or from the airport. The variable cost for a tour totals $42.00 for fuel, driver, and so on. The monthly fixed cost for NCT is $13,860. Required: a. How many tours must NCT sell every month to break even? b. NCT's owners believe that 50 tours is a reasonable forecast of the average monthly demand. What is the margin of safety in terms of the number of tours?
Golden Gate Novelties (GGN) sells souvenir key chains at the local airport. GGN charges $13.00 per chain. The variable cost for a chain, including the wholesale cost of the chain, packaging, the commission paid to the airport operator, and so on, is $11.40. The annual fixed cost for GGN is $15,120. Required: How many cases must Golden Gate Novelties sell every year to break even? Note: Do not round intermediate calculations. The owner of GGN believes that the company can sell 12,600 chains a year. What is the margin of safety in terms of the number of chains?
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Cruse Cleaning offers residential and small office cleaning services. An average cleaning service has the following price and costs. Sales price $ 128.00 per service Variable costs 90.00 per service Fixed costs 124,982 per year Cruse Cleaning is subject to an income tax rate of 22 percent. Required: How many cleaning services must Cruse Cleaning sell in a year to break even? How many cleaning services must Cruse Cleaning sell in a year to earn an annual operating profit of $34,086 after taxes?
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Aydesurv CompanyAydesurv Company currently sells hot dogs. During a typical month, the stand reports a profit of ₱9,000 withsales of ₱50,000, fixed costs of ₱21,000, and variable costs of ₱0.64 per hot dog.Next year, the company plans to start selling nachos for ₱3 per unit. Nachos will have a variable cost of ₱0.72and new equipment and personnel to produce nachos will increase monthly fixed costs by ₱8,808. Initial sales ofnachos should total 5,000 units. Most of the nacho sales are anticipated to come from current hot dog purchasers,therefore, monthly sales of hot dogs are expected to decline to ₱20,000.After the first year of nacho sales, the company president believes that hot dog sales will increase to ₱33,750 amonth and nacho sales will increase to 7,500 units a month.32. Determine the monthly breakeven sales in dollars before adding nachos.33. Determine the monthly breakeven sales during the first year of nachos sales, assuming a constant salesmix of 1 hotdog and 2 units of…
Outback Outfitters sells recreational equipment. One of the company’s products, a small camp stove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associated with the stove total $108,000 per month.Required:1. What is the break-even point in unit sales and in dollar sales?2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.)3. At present, the company is selling 8,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions,and one as operations would appear after the proposed changes. Show both total and per unit data on your statements.4. Refer to the data in (3) above. How many stoves would have to be sold at the new selling price…
Outback Outfitters sells recreational equipment. One of the company’s products, a small campstove, sells for $50 per unit. Variable expenses are $32 per stove, and fixed expenses associatedwith the stove total $108,000 per month.Required:1. Compute the break-even point in unit sales and in dollar sales.2. If the variable expenses per stove increase as a percentage of the selling price, will it result in ahigher or a lower break-even point? Why? (Assume that the fixed expenses remain unchanged.)3. At present, the company is selling 8,000 stoves per month. The sales manager is convincedthat a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating con-ditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements.4. Refer to the data in (3) above. How many stoves would have to be sold at the new selling priceto…
Pens and Prints manufactures and sells T-shirts imprinted with college names and slogans. Last year, the shirts sold for $7.50 each, and the variable cost to manufacture them was $2.25 per unit. The company needed to sell 20,000 shirts to break-even. The after tax net income last year was $5,040. Donnelly's expectations for the coming year include the following: • The sales price of the T-shirts will be $9• Variable cost to manufacture will increase by one-third • Fixed costs will increase by 10%• The income tax rate of 40% will be unchanged. Sales for the coming year are expected to exceed last year's by 1,000 units. If this occurs, How much will be the sales revenue in the coming year?