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Jonah Graham owns and operates The Green Thumb Company (GTC), which provides live plants and flower...

Jonah Graham owns and operates The Green Thumb Company (GTC), which provides live plants and flower arrangements to professional offices. Jonah has fixed costs of $3,520 per month for office/greenhouse rent, advertising, and a delivery van. Variable costs for the plants, fertilizer, pots, and other supplies average $22 per job. GTC charges $62 per month for the average job.

Required:

1. How many jobs must GTC average each month to break even?

??? jobs per month

2. What is the operating income for GTC in a month with 85 jobs? Enter a net loss as a negative amount. $ What is the operating income for GTC in a month with 94 jobs?

$ ???

3. Jonah faces a tax rate equal to 20 percent. How many jobs must Jonah have per month to earn an after-tax income of $1,200? Round your answer to the nearest whole number of jobs.

??? jobs per month

4. Suppose that Jonah’s fixed costs increase to $3,652 per month and he decides to increase the price to $76 per job. What is the new break-even point in number of jobs per month? Round your answer to the nearest whole number of jobs.

??? jobs per month

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Answer #1

1. Number of jobs must GTC average each month to break even is 88 jobs

Calculation:

Break even(in jobs) = Fixed cost per month ÷ Contribution per average job

= $3520/$40

= 88 Jobs

Contribution per average job = Sales per average job - variable cost per average job = 62-22 = $ 40

2.

85 Jobs 94 Jobs
Sales (No. of job x $62) 5270 5828
Less: Variable cost (No. of jobs x $22) -1870 -2068
Contribution 3400 3760
Less: Fixed cost -3520 -3520
Operating income/(loss) -120 240

3. Total number of jobs Jonah must have per month to earn an after-tax income of $1,200 are 126 jobs

calculation:

No. of jobs per month to earn an after tax income of $1,200 = (Profit before tax+fixed cost) ÷ Contribution per average job

= (1500+3520)/40

= 125.5 Jobs or 126 Jobs (Rounded)

Profit before tax = $1200/80% = $1500.

4. New break event point = New fixed cost÷ New contribution per average job

= 3,652/54

= 68 Jobs

New contribution per average job = $76-$22 = $54

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