A.
Break-even Analysis: It refers to an analysis of the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:
To compute: Company M’s break-even number of accounts.
B.
To compute: the average weekday profit
C.
To compute: the average weekend day profit
D.
To compute: Company M’s revised break-even number of accounts.
E.
To Explain: Whether the company will still remain profitable for an average weekday under the scenario in (D).
Trending nowThis is a popular solution!
Chapter 19 Solutions
Bundle: Financial & Managerial Accounting, 14th + Working Papers for Warren/Reeve/Duchac's Corporate Financial Accounting, 14th + Working Papers, ... & Managerial Accounting, 14th + CengageNOWv2,
- 4. Thrills Amusement Park provides a variety of attractions. Thrills sells tickets at $50 per person as a one-day entrance fee. Variable costs are $28 per person, and fixed costs are $178,800 per month. Assume that Thrills reduces fixed costs from $178,800 per month to $166,500 per month. Compute the new breakeven point in tickets and in sales dollars. $376,445 $378,450 $411,350 $395,200arrow_forwardWaterman's WaterWorld Tourist Park has collected the following data for operations for the year: $ 2,000,000 $ 546,875 Total revenues Total fixed costs Total variable costs Total tickets sold $ 1,125,000 50,000 Required: a. What is the average selling price for a ticket? b. What is the average variable cost per ticket? Note: Round your final answer to 2 decimal places. c. What is the average contribution margin per ticket? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. 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 $140,000 in operating profits, they will close it down. What number of tickets must be sold for Waterman's to make a $140,000 operating profit for the year on ticket sales? Note: Do not round intermediate calculations. a. Average selling price b. Average variable cost c. Average contribution margin d. Break-even point e.…arrow_forward↑ Suppose River Valley Lodge incurs $70,000 of fixed costs each month Compute the (a) total fixed cost and (b) fixed cost per guest if the hotel has 14,000 guests next month. Compare the fixed cost per guest at the higher occupancy rate to the fixed cost per guest when only 1,500 guests stay during the month. (a) Compute the total fixed cost if the hotel has 14,000 guests next month. Total fixed costs to wide changes in volume, therefore, total fixed costs will (b) Compute the fixed cost per guest if the hotel has 14,000 guests next month. First, identify the formula to compute the fixed cost per guest, then compute the foxed cost per guest at (1) 14,000 guests and at (2) 1.500 guests (Round the fixed cost per quest to the nearest cent.) Fixed cost per quest Nextarrow_forward
- Cullumber provides shuttle service between 4 hotels near a medical center and an international airport. Cullumber uses two 10- passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is as follows. Sales (1,370 passengers) Variable costs Fuel Tolls and parking Maintenance Contribution margin Fixed costs Salaries Depreciation (straight-line) Insurance Net income Break-even point Break-even point $3,836 $ 2,359 655 12,300 1,100 1,000 $34,250 6,850 Calculate the break-even point in (1) sales dollars and (2) number of passengers. 27,400 14,400 $13,000 passengersarrow_forwardAnu’s Amusement Center has collected the following data for operations for the year. Total revenues $ 2,016,000 Total fixed costs $ 694,400 Total variable costs $ 1,134,000 Total tickets sold 63,000 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? (Do not round intermediate calculations.) d. What is the break-even point? (Do not round intermediate calculations.) e. Anu has decided that unless the operation can earn at least $222,600 in operating profits, she will close it down. What number of tickets must be sold for Anu’s Amusements to make a $222,600 operating profit for the year on ticket sales? (Do not round intermediate calculations.)arrow_forwardSuppose a Best Western motel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room motel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per year. The amount of net income on rooms that will be generated if the motel is half full throughout the entire year is: a. $(1,192,500) b. $1,590,000 c. $2,737,500 d. $990,000arrow_forward
- Analyze Pacific Airways Pacific Airways provides air travel services between Los Angeles and Seattle. Cost information per flight is as follows: Each flight has a capacity of 150 seats, with an average of 125 seats sold per flight at an average ticket price of 180. Assume Pacific Airways is considering a new service that would provide tickets at half price. Passengers would need to fly standby to receive the discount, but would be provided a flight for a given day of travel. An analysis revealed that an average of 8 existing passengers would use the new discounted tickets for travel. In addition, 15 new passengers would be attracted to the offer. a. Determine the contribution margin per passenger for the full-priced ticket. b. Determine the break-even number of seats sold per flight. c. Determine the contribution margin per passenger for discounted tickets. d. Should Pacific Airways offer the discounted ticket plan? Answer the question by computing the incremental contribution margin per flight for the plan.arrow_forwardCVP analysis, changing revenues and costs.</b> Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed costs are $23,500 per month. Hamilton Air charges passengers $1,500 per round-trip ticket. Calculate the number of tickets Sunset must sell each month to (a) break even and (b) make a target operating income of $10,000 per month in each of the following independent cases. Required: Sunset’s variable costs are $43 per ticket. Hamilton Air pays Sunset 6% commission on ticket price. Sunset’s variable costs are $40 per ticket. Hamilton Air pays Sunset 6% commission on ticket price. Sunset’s variable costs are $40 per ticket. Hamilton Air pays $60 fixed commission per ticket to Sunset. Comment on the results. Sunset’s variable costs are $40 per ticket. It receives $60 commission per ticket from Hamilton Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.arrow_forwardWestern Repair Shop has a monthly target operating income of $50,000. Variable expenses are 55% of sales and monthly fixed expenses are $9,600. Requirements 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal. 2. Express Western Repair Shop's margin of safety as a percentage of target sales. 3. What is Western Repair Shop's operating leverage factor at the target level of operating income? 4. Assume that the repair shop reaches its target. By what percentage will Western Repair Shop's operating income fall if sales volume declines by 16%? Requirement 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal. Begin by identifying the formula to compute the margin of safety. Target sales in dollars Margin of safety in dollars The margin of safety is $. (Round interim calculations up to the nearest whole dollar and your final answer up to the nearest whole dollar.) Break-even sales in dollars =arrow_forward
- Crane provides shuttle service between 4 hotels near a medical center and an international airport. Crane uses two 10-passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is as follows. Sales (1,400 passengers) Variable costs Fuel Tolls and parking Maintenance Contribution margin Fixed costs Salaries Depreciation (straight-line) Insurance Net income $5,457 2,012 931 13,500 1,700 1,000 $33,600 8,400 25,200 16,200 $9,000arrow_forwardEngberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income Amount $ 88,000 35,200 52,800 41,360 $ 11,440. Percent of Sales 100% 40% 60% Required: 1. What is the company's degree of operating leverage? 2. Using the degree of operating leverage, estimate the impact on net operating income of a 6% increase in unit sales. 3. Construct a new contribution format income statement for the company assuming a 6% increase in unit sales.arrow_forwardRequired information [The following information applies to the questions displayed below.] Data for Hermann Corporation are shown below: Selling price Variable expenses Contribution margin Fixed expenses are $74,000 per month and the company is selling 4,400 units per month. Req 2A Per Unit $ 70 49 $ 21 2-a. Refer to the original data. How much will net operating income increase (decrease) per month if the co pany uses higher-quality components that increase the variable expense by $4 per unit and increase unit sales by 25%. 2-b. Should the higher-quality components be used? Req 2B Percent of Sales Complete this question by entering your answers in the tabs below. 100% 70 30% increases by Refer to the original data. How much will net operating income increase (decrease) per month if the company uses higher- quality components that increase the variable expense by $4 per unit and increase unit sales by 25%. Net operating incomearrow_forward
- Financial & Managerial AccountingAccountingISBN:9781337119207Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning