All that Blooms provides environmentally friendly lawn services for homeowners. Its operating costs are as follows.
| Depreciation | $1,400 per month |
| Advertising | $200 per month |
| Insurance | $2,000 per month |
| Weed and feed materials | $12 per lawn |
| Direct Labor | $10 per lawn |
| Fuel | $2 per lawn |
All That Blooms charges $60 per treatment for the average single-family lawn
Instructions
Determine the company's break-even point in (a) number of lawns serviced per month and (b) dollars
The palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.
| Salaries | $5,900 per month |
| Utilities | $1,100 per month |
| Depreciation | $1,000 per month |
| Maintenance | $100 per month |
| Maid service | $14 per room |
| Other costs | $28 per room |
Instructions
Determine the inn's break-even point in (a) number of rented rooms per month and (b) dollars
In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales.
Instructions
- Determine the contribution margin in dollars, per unit, and as a ratio.
- Using the contribution margin technique, compute the break-even point in dollars and in units.
Spencer kars provides shuttle services between four hotels near a medical center and an international airport. Spencer Kars 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 shown below.
Instructions
- Calculate the break-even point in (1) dollars and (2) number of fares.
- Without calculation, determine the contribution margin at the break-even point
In 2020, Manhoff Company had a break-event point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2021, the selling price and the variable costs per unit did not change, but the break-event point increased to $420,000.
Instructions
- Compute the varitable costs per unit and the contribution margin ratio for 2020
- Compute the increase in fixed costs for 2021
Billings Company has the following information available for September 2020.
Naylor Company had $210,000 of net income in 2019 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,ooo. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2020.
Instructions
- Compute the number of units sold in 2019.
- Compute the number of units that would have to be sold in 2020 to reach the stock holders' desired profit level.
- Assume that Naylor Company sells the same number of units in 2020 as it did in 2019. What would the selling price have to be in order to reach the stockholders' desired profit level?
Yams Company reports the following operating results for the month of August: sales $400,000 (units 5000), variable costs $240,000, and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.
- Increase selling price by 10% with no change in total variable costs or units sold.
- Reduce variable costs to 55% of sales
Instructions
Compute the net income to be earned under each alternative. Which courses of action will produce the higher net income?
Glacial Company estimates that variable costs will be 62.5% of sales, and fixed costs will total $600,000. The selling price of the product is $4.
Instructions
- Prepare a CVP graph, assuming maximum sales of $3,200,000. (Note: Use $400,000 increments for sales and costs and 100,000 increments for nits.)
- Compute the break-even pount in (1) units and (2) dollars.
- Assuming actual sales are $2 million, compute the margin of safety in (1) dollars and (2) as a ratio
Carey Company had sales in 2020 of $1,560,000 on 60,000 units. Variable costs totaled $900,000, and fixed costs totaled $500,000.
A new raw material is available that will decrease the variable cost per unit by 20% (or $3). However, to process the new raw material, fixed operating costs will increase by $100,000, Managements feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sale price reduction will result in a 5% increase in the number of units sold.
Instructions
Prepare a projected CVP income statement for 2020
- assuming the changes have not been made, and
- assuming that changes are made as described.