Question

10 Biscayne's Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: 1.36 Rental price per day Variable cost per day Standard $30.00 10.50 Deluxe $38.80 15.20 points eBook Biscayne's total fixed cost is $18,500 per month. Required: 1. Determine the contribution margin per rental day and contribution margin ratio for each model that Biscayne's offers. 2. Which model would Biscayne's prefer to rent? 3. Calculate Biscayne's break-even point if the product mix is 50/50. 4. Calculate the break-even point if Biscayne's product mix changes so that the standard model is rented 75 percent of the time and the deluxe model is rented for only 25 percent. 5. Calculate the break-even point if Biscayne's product mix changes so that the standard model is rented 25 percent of the time and the deluxe model is rented for 75 percent. Hint Print References Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Determine the contribution margin per rental day and contribution margin ratio for each model that Biscayne's offers. (Round your "Unit Contribution Margin" answers to 2 decimal places.) Unit Contribution Margin Contribution Margin Ratio Standard per Day 96 Deluxe per Day % Required 1 Required 2 >

Answer 1

	Standard	Deluxe
Rental price per day	$30	$38
Variable cost per day	$10.50	$15.20
Contribution margin	$19.5	$22.8
Contribution margin ratio	65%($19.5/$30)	60%($22.8/$38)

2. Deluxe model

3. Break even point = Total fixed cost/ Combined contribution margin per unit

=$18,500/[(19.50×50%)+($22.80×50%)]

=$18,500/($9.75+$11.4)

=$18,500/$21.15

=875 rental days

4. BEP = $18,500/[($19.50×75%)+($22.80×25%)]

=$18,500/($14.625+$5.7)

=$18,500/$20.325

=910 rental days

5.

BEP =$18,500/[($19.50×25%)+($22.80×75%)]

=$18,500/($4.875+$17.1)

=$18,500/$21.975

=842 days