Question

In: Accounting

Rental price per day 60.00$ $68.00 Variable cost per day 25.50$ 30.20$ First column standard price...

Rental price per day	60.00$	$68.00
Variable cost per day	25.50$	30.20$

First column standard price

second column Deluxe price

fixed cost 26,000 per month

1. Determine Biscayne’s new break-even point in each of the following independent scenarios:

a. Product mix is 40/60.

b. Sales price increases on both models by 20 percent. (Assume a product mix of 50/50.)

c. Fixed costs increase by $5,200. (Assume a product mix of 50/50.)

d. Variable costs increase by 30 percent. (Assume a product mix of 50/50.)

Expert Solution

1.
a.

		Standard	Deluxe
a	Rental Price per day	$ 60.00	$ 68.00
b	Variable Cost per day	$ 25.50	$ 30.20
c	Contribution Margin per day (a-b)	$ 34.50	$ 37.80
d	Proportion (c-d)	40%	60%
e	Weighted Contribution Margin	$ 13.80	$ 22.68	$ 36.48

Breakeven = Fixed Costs / Weighted Contribution margin
= $26000 / $36.48 = 713

b.

		Standard	Deluxe
a	Rental Price per day	$ 72.00	$ 81.60
b	Variable Cost per day	$ 25.50	$ 30.20
c	Contribution Margin per day (a-b)	$ 46.50	$ 51.40
d	Proportion (c-d)	50%	50%
e	Weighted Contribution Margin	$ 23.25	$ 25.70	$ 48.95

Sales Price
Standard = $60 x 1.2, Deluxe =$68 x 1.2
Breakeven = Fixed Costs / Weighted Contribution margin
= $26000 / $48.95 = 532

c.

		Standard	Deluxe
a	Rental Price per day	$ 60.00	$ 68.00
b	Variable Cost per day	$ 25.50	$ 30.20
c	Contribution Margin per day (a-b)	$ 34.50	$ 37.80
d	Proportion (c-d)	50%	50%
e	Weighted Contribution Margin	$ 17.25	$ 18.90	$ 36.15

Breakeven = Fixed Costs / Weighted Contribution margin
= $31200 / $48.95 = 864

d.

		Standard	Deluxe
a	Rental Price per day	$ 60.00	$ 68.00
b	Variable Cost per day	$ 33.15	$ 39.26
c	Contribution Margin per day (a-b)	$ 26.85	$ 28.74
d	Proportion (c-d)	50%	50%
e	Weighted Contribution Margin	$ 13.43	$ 14.37	$ 27.80

Variable cost
Standard = $25.50 x 1.3, Deluxe = $30.20 x 1.3
Breakeven = Fixed Costs / Weighted Contribution margin
= $26000 / $27.80 = 936

ekkarill92 answered 2 years ago

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