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Chapter 20: Q11SE (page 1122)

Question: Use the following information to complete Short Exercises S20-10 through S20-15.

Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at \(70 per person as a one-day entrance fee. Variable costs are \)42 per person, and fixed costs are $170,800 per month.

Compute Funday Park鈥檚 contribution margin ratio. Carry your computation to two decimal places. Use the contribution margin ratio approach to determine the sales revenue Funday Park needs to break even

Short Answer

Expert verified

Answer

The sales in dollars is $427,000.

Step by step solution

01

Calculation of Contribution margin ratio

Contributionmargin=Salesprice--Variablecost=$70-$42=$28Contributionmarginratio=ContributionmarginperunitSalesrevenue=$28$70=40%

02

Calculation of breakeven point in sales dollars

Salesrequiredindollars=Fixedcost+TargetprofitContributionmarginratio=$170,800+$040%=$427,000

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Most popular questions from this chapter

Question: Determining fixed cost per unit

For each total fixed cost listed below, determine the fixed cost per unit when sales are 50, 100, and 200 units.

Store rent $ 5,000

Manager鈥檚 salary 3,000

Equipment lease 500

Depreciation on fixtures 250

What is the margin of safety? What are the three ways it can be expressed?

A furniture manufacturer specializes in wood tables. The tables sell for \(100 per unit and incur \)40 per unit in variable costs. The company has \(6,000 in fixed costs per month. Expected sales are 200 tables per month.

17. Calculate the margin of safety in units.

18. Determine the degree of operating leverage. Use expected sales.

19. The company begins manufacturing wood chairs to match the tables. Chairs sell for \)50 each and have variable costs of \(30. The new production process increases fixed costs to \)7,000 per month. The expected sales mix is one table for every four chairs. Calculate the breakeven point in units for each product.

The budgets of four companies yield the following information:

Company

Blue Red Green Yellow

Net Sales Revenue \( 1,900,000 \) (d) \( 1,500,000 \) (j) Variable Costs (a) 47,250 1,050,000 256,200 Fixed Costs (b) 168,000 159,000 (k) Operating Income (Loss) 298,500 (e) (g) 97,800

Units Sold 190,000 9,000 (h) (l) Contribution Margin per Unit \( 3.00 \) (f) \( 75.00 \) 18.00

Contribution Margin Ratio (c) 80% (i) 30%

Requirements

1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.)

2. Which company has the lowest breakeven point in sales dollars?

3. What causes the low breakeven point?

What is a fixed cost? Give an example.
See all solutions

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