a)
To determine: The break-even volume per evening performance.
Introduction:
Break-even point (BEP):
The break-even point is measured in units or in sales term to identify the point in a business which is required to cover with the total costs. The total profit at break-even point is 0.
a)
Answer to Problem 27P
The break-even volume per evening performance is $986.19
Explanation of Solution
Given information:
| Item | Selling Price (P) | Variable Cost (VC) | % of Revenue |
| Soft Drink | $1.00 | $0.65 | 25 |
| Wine | $1.75 | $0.95 | 25 |
| Coffee | $1.00 | $0.30 | 30 |
| Candy | $1.00 | $0.30 | 20 |
Formula to calculate Total variable cost (TVC):
Calculation of Total variable cost (TVC):
The total variable cost is calculated by multiplying the variable cost with the variable cost percentage.
Soft Drinks:
Wine:
Coffee:
Candy:
Calculation of
The value is calculated by dividing the variable cost by selling price.
Soft drinks:
Wine:
Coffee:
Candy:
Calculation of
The value is calculated by subtracting 1 with
Soft drinks:
Wine:
Coffee:
Candy:
Calculation of contribution of weighted revenue:
The contribution weighted revenue is calculated by multiplying the value of
Soft drinks:
Wine:
Coffee:
Sandwiches:
Formula to calculate total of contribution weighted revenue:
Calculation of total contribution weighted revenue:
The total contribution weighted revenue is calculated by summing all the individual contribution weighted revenue.
Formula to calculate break-even point (BEP) in dollars:
Calculation of Break-even point (BEP) in dollars:
The Break-even point is calculated by dividing the fixed cost with the value of total contribution of weighted revenue.
Hence, the Break-even point (BEP) in dollarsis$986.19.
b)
To determine: The sales of wine each evening at the break-even point.
Introduction:
Break-even point (BEP):
The break-even point is measured in units or in sales term to identify the point in a business which is required to cover with the total costs. The total profit at break-even point is 0.
b)
Answer to Problem 27P
The sales of wine each evening at the break-even point is 140.9 servings.
Explanation of Solution
Given information:
| Item | Selling Price (P) | Variable Cost (VC) | % of Revenue |
| Soft Drink | $1.00 | $0.65 | 25 |
| Wine | $1.75 | $0.95 | 25 |
| Coffee | $1.00 | $0.30 | 30 |
| Candy | $1.00 | $0.30 | 20 |
Formula to calculate Total variable cost (TVC):
Calculation of Total variable cost (TVC):
The total variable cost is calculated by multiplying the variable cost with the variable cost percentage.
Soft Drinks:
Wine:
Coffee:
Candy:
Calculation of
The value is calculated by dividing the variable cost by selling price.
Soft drinks:
Wine:
Coffee:
Candy:
Calculation of
The value is calculated by subtracting 1 with
Soft drinks:
Wine:
Coffee:
Candy:
Calculation of contribution of weighted revenue:
The contribution weighted revenue is calculated by multiplying the value of
Soft drinks:
Wine:
Coffee:
Sandwiches:
Formula to calculate total of contribution weighted revenue:
Calculation of total contribution weighted revenue:
The total contribution weighted revenue is calculated by summing all the individual contribution weighted revenue.
Formula to calculate break-even point (BEP) in dollars:
Calculation of Break-even point (BEP) in dollars:
The Break-even point is calculated by dividing the fixed cost with the value of total contribution of weighted revenue.
The Break-even point (BEP) in dollars is $986.19.
Formula to calculate number of wine servings at breakeven:
Calculation of number of wine servings at breakeven:
The number of wine servings is calculated by dividing the value obtained by multiplying the breakeven sales with percent of revenue with the selling price of wine.
Hence, the number of wine servings each evening at break-even is 140.9 servings.
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Chapter 7 Solutions
Principles Of Operations Management
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