= Breakeven units = Breakeven sales dollars
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The contribution margin per unit is calculated by subtracting the variable cost per unit from the selling price per unit. Breakeven units = Total fixed costs / Contribution margin per unit Show more…
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Exhibit 1: Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars) 2003 2004 2006 Sales Cost of goods sold Gross margin Expenses Selling expense Salaries Commissions Advertising Administrative expenses Rent Depreciation Miscellaneous expenses Total expenses Net income $8,583 $4,326 $4,257 $8,102 $4,132 $3,970 $10,711 $5,570 $5,141 $2,021 $429 $254 $418 $420 $2,081 $405 $250 $425 $420 $84 $93 $3,758 $212 $3,215 $536 $257 $435 $048 $142 $122 $5,547 ($406) $53 $3,679 $578 Source: Casewriter Exhibit 2: Hallstead Jewelers Operating Statistics 2003 2004 2006 Sales space (square feet) Sales per square foot Sales tickets Average sales ticket 10,230 $839 5,341 $1,607 10,230 $792 5,316 $1,524 15,280 $701 6,897 $1,553 Source: Casewriter
Akash M.
Charter Revenue The owner of a luxury motor yacht that sails among the 4,000 Greek islands charges $420 per person per day if exactly 20 people sign up for the cruise. However, if more than 20 people (up to the maximum capacity of 90) sign up for the cruise, then each fare is reduced by $5 per day for each additional passenger. Assume at least 20 people sign up for the cruise, and let x denote the number of passengers above 20. (a) Find a function R giving the revenue per day (in dollars) realized from the charter. R(x) = (b) What is the revenue per day (in dollars) if 47 people sign up for the cruise? $ (c) What is the revenue per day (in dollars) if 62 people sign up for the cruise? $ Aging Drivers The number of fatalities due to car crashes, based on the number of miles driven, begins to climb after the driver is past age 65. Aside from declining ability as one ages, the older driver is more fragile. The number of fatalities per 100 million vehicle miles driven is approximately N(x) = 0.0336x^3 - 0.118x^2 + 0.215x + 0.7 (0 ≤ x ≤ 7) where x denotes the age group of drivers, with x = 0 corresponding to those aged 50–54, x = 1 corresponding to those aged 55–59, x = 2 corresponding to those aged 60–64, ..., and x = 7 corresponding to those aged 85–89. What is the fatality rate per 100 million vehicle miles driven for an average driver in the 50–54 age group? In the 55–59 age group? 50–54 fatalities/100 million miles 55–59 fatalities/100 million miles
Adi S.
The Hampshire Company manufactures umbrellas that sell for $12.50 each. In 2014, the company made and sold 60,000 umbrellas. The company had fixed manufacturing costs of $216,000. It also had fixed costs for administration of $79,525. The per-unit costs of each umbrella are as follows: Direct Materials: $3.00 Direct Labor: $1.50 Variable Manufacturing Overhead: $0.40 Variable Selling Expenses: $1.10 Using the information above, perform a cost-volume-profit (CVP) analysis by completing the steps below. 1. Compute net income before tax. 2. Compute the unit contribution margin in dollars and the contribution margin ratio for one umbrella. 3. Calculate the break-even point in units and dollars of revenue. Note: This is a required part of the CVP analysis and satisfies Part C of Section I. 4. Calculate the margin of safety: a. In units b. In sales dollars c. As a percentage 5. Calculate the degree of operating leverage. 6. Assume that sales will increase by 20% in 2015. Calculate the percentage of before-tax income for this increase. Provide calculations to prove that your percentage increase is correct based on the operating leverage calculated in step 5. 7. Compute the number of umbrellas that Hampshire is required to sell if it plans to earn $120,000 in income before taxes by using the target income formula. Proof your calculation. 8. A company that specializes in tours in England has offered to purchase 5,000 umbrellas at $11 each from Hampshire. The variable selling costs of these additional units will be $1.30 as opposed to $1.10 per unit. Also, this production activity will incur another $15,000 of fixed administrative costs. Should Hampshire agree to sell these additional 5,000 umbrellas to the touring business? Provide calculations to support your decision.
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