Question

1 2-A2 Cost-Volume-Profit and Vending Machines Vendmart Food Services Company operates and services snack vending machines located in restau- rants, gas stations, and factories in four southwestern states. The machines are rented from the manu- facturer. In addition, Vendmart must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 80 machines. Fixed monthly expenses follow: $1,768 1,600 Machine rental: 80 machines @ $22.10 Space rental: 80 locations @ $20.00 Part-time wages to service the additional 80 machines Other fixed costs Total monthly fixed costs SOO $4,000 Other data follow: Per $100 of Sales Per Unit (Snack) $1.00 Selling price Cost of snack Contribution margin 68 These questions relate to the given data unless otherwise noted. Consider cach question independently. 1. What is the monthly break-even point in number of units (snacks)? In dollar sales? 2. If 45,000 units were sold, what would be the company's net income? 3. If the space rental cost was doubled, what would be the monthly break-even point in number of units? In dollar sales? 4. Refer to the original data. If, in addition to the fixed space rent, Vendmart Food Services Company paid the vending machine manufacturer $.07 per unit sold, what would be the monthly break- even point in number of units? In dollar sales? 5. Refer to the original data. If, in addition to the fixed rent, Vendmart paid the machine manufac turer 5.11 for each unit sold in excess of the break-even point, what would the new net income be if 45,000 units were sold?

Answer 1

Answer with working notes is given below

1 Snacks Snacks Snacks to be sold Fixed Cost Contribution per unit $4,000 $0.32 12,500 Break even point in dollar sales $12,500 Sales Fixed Cost Contribution Margin ratio | $4,000 32% # $12,500 2 If 45,000 Units are sold Sales Variable Cost Contribution Fixed Cost Net Operating Income $45,000 (45,000*$1) $30,600 (45,000*$0.68) $14,400 $4,000 $10,400 3 Snacks Snacks to be sold Revised Fixed cost Contribution per unit $5,600 $0.32 17,500 Break even point in dollar sales | $17,500 $ Sales Revised Fixed cost Contribution Margin ratio $5,600 32% $17,500 -L 3 291 Fixed Cost Existing Increase in space rental cost Revised Fixed cost $4,000 $1,600 $5,600 Snacks Snacks to be sold Revised Fixed cost Contribution per unit $4,000 0.25 16,000 Break even point in dollar sales | $16,000 $ Sales Fixed Cost Contribution Margin ratio $4,000 2 5% $16,000 1 $1.00 Selling price Less: Cost of snack payment to vending machine manufacturer Revised Contribution per unit Contribution margin (Contribution/Sales) % $0.68 $0.07 $0.25 25.00% 5 $30,600 $3,575 Sales Variable Cost snack cost payment to machine manufacturer Total variable cost Contribution Fixed Cost Net Operating Income $45,000 (45,000*$1) (45,000*$0.68) As per working below $34,175 $10,825 $4,000 $6,825 Total units sold Break even point Excess units sold payment to machine manufacturer Total payment 45,000 12,500 32,500 A $0.11 B $3,575 AXB

Answer 2

Refer to the original data. If, in addition to the fixed space rent, Vendmart Food Services Company paid the vending machine manufacturer $.07 per unit sold, what would be the monthly break-even point in the number of units? In dollar sales?