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.)

Solutions

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


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