1. | |
Current Sales | $315,000 |
Units Sold | $5,000 |
Current Sales Price | $63 |
Current Sales Price | $63.00 |
Increase in Sales Price by 10% | $6.30 |
New Sales Price | $69.30 |
Computation of Net Income | |
Sales | $346,500 |
Less: Variable Costs | $218,000 |
Less: Fixed Costs | $70,000 |
Net Income | $58,500 |
2. | |
Current Sales | $315,000 |
New Variable Costs @ 60% of Sales | $189,000 |
Computation of Net Income | |
Sales | $315,000 |
Less: Variable Costs | $189,000 |
Less: Fixed Costs | $70,000 |
Net Income | $56,000 |
3. | |
Current Fixed Costs | $70,000 |
Less: Reduction in Fixed Costs | $23,000 |
New Fixed Costs | $47,000 |
Computation of Net Income | |
Sales | $315,000 |
Less: Variable Costs | $218,000 |
Less: Fixed Costs | $47,000 |
Net Income | $50,000 |
Net Profit in Alternative 1 | $58,500 |
Net Profit in Alternative 2 | $56,000 |
Net Profit in Alternative 3 | $50,000 |
Net income would be highest under alternative 1 when | |
the sales price is increased by 10% | |
Computations for Soma Inn | |
Breakeven point = Fixed Costs / Contribution per unit | |
Computation of Contribution per room | |
Contribution = Revenue - Variable Costs | |
Sales - Revenue per room | $60 |
Less: Variable Costs | |
Maid Service | $8 |
Other Costs | $34 |
Total Variable Costs | $42 |
Contribution per room | $18 |
Computation of Total Fixed Costs per month | |
Salaries | $8,800 |
Utilities | $2,700 |
Depreciation | $1,300 |
Maintenance | $700 |
Total Fixed Costs per month | $13,500 |
1. | |
Breakeven point = Fixed Costs / Contribution per unit | |
Breakeven point = $ 13,500 / 18 | |
Breakeven point in rooms = 750 room nights | |
2. | |
Break even point in sales = Breakeven point in rooms * | |
Revenue per room | |
Break even point in sales = 750 * $ 60 | |
Break even point in sales = $ 45,000 | |
Margin of Safety = Actual Sales - Break even Point | |
Computation of Actual Sales | |
Average Rooms Rented per day | 50 |
Number of Days | 30 |
Total Rooms Rented during the month | 1,500 |
Computation of Actual Sales - Revenue from Room Rent | |
Total Rooms Rented during the month | 1,500 |
Room Rent per night | 60 |
Actual Sales - Revenue from Room Rent | 90,000 |
Breakeven Point in Sales | 45,000 |
1. | |
Margin of Safety = Actual Sales - Break even Point | |
Margin of Safety = $ 90,000 - $ 45,000 | |
Margin of Safety = $ 45,000 | |
2. | |
Margin of Safety Ratio = Margin of Safety / Actual Sales | |
Margin of Safety Ratio = $ 45,000 / $ 90,000 | |
Margin of Safety Ratio = 0.50 | |
Margin of Safety Ratio = 50% |
Barnes Company reports the following operating results for the month of August: sales $315,000 (units 5,000);...
Barnes Company reports the following operating results for the month of August: sales $320,000 (units 5,000); variable costs $216,000; and fixed costs $70,500. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net income $enter the net income that will be earned under the first Alternative 2. Reduce variable costs...
Exercise 19-1 The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $52 a night. Operating costs are as follows. Salaries Utilities Depreciation Maintenance Maid service Other costs $9,600 per month 2,000 per month 1,200 per month 700 per month 6 per room 28 per room Your answer is partially correct. Try again. Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars. 1. Break-even...
Barnes Company reports the following operating results for the month of August: sales $300,000 (units 5,000); variable costs $217,000; and fixed costs $70,000. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net incomes 2. Reduce variable costs to 55% of sales. Net income $ 3. Reduce fixed costs by...
Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $213,000; and fixed costs $71,600. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net income $ 2. Reduce variable costs to 58% of sales. Net income $ 3. Reduce fixed costs...
E6.1 (LO 1), AP rooms that are rented at $60 a night. Operating costs are as follows. Service The Soma Inn is trying to determine its break-even point. The inn has 75 Salaries Utilities $10,600 per month Maintenance Maid service Other costs 2,400 per month 1,500 per month 800 per month 8 per room 34 per room Instructions a. Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars. b. If the inn plans...
The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $56 a night. Operating costs are as follows. $10,000 per month Salaries 2,100 per menth Utilities Depreciation 1,500 per month 800 per month Maintenance 7 per room Maid service 31 per room Other costs Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars 1. Break-even point in rooms 2. Break-even point If the inn...
The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $56 a night. Operating costs are as follows. Salaries Utilities Depreciation Maintenance Maid service Other costs $10,000 per month 2,600 per month 1,400 per month 700 per month 8 per room 34 per room Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars. 1 Break-even point in rooms 2. Break-even point $ per month...
The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $ 60 a night. Operating costs are as follows Salaries Utilities Depreciation Maintenance Maid service Other costs $11,150 per month 2,900 per month 1,300 per month 850 per month 8 per room 34 per room Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars. 1. Break-even point in rooms 2. Break-even point per month...
Please help thank you The Soma Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating costs are as follows. Salaries Utilities Depreciation Maintenance Maid service Other costs $8,750 per month 2,700 per month 1,200 per month 850 per month 8 per room 34 per room Determine the inn's break-even point in (1) number of rented rooms per month and (2) dollars. 1. Break-even point in rooms 2. Break-even...
Exercise 19-3 Barnes Company reports the following operating results for the month of August: sales $315,000 (units 5,000); variable costs $213,000; and fixed costs $71,600. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net incomes 2. Reduce variable costs to 59% of sales. Net incomes 3. Reduce fixed costs...