In: Accounting
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.)
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