Hello, I need help solving this accounting problem. Required:Perform a sensitivity analysis by answering the following questions:a. What is the break-even point in sales dollars for RBC?b. What is the margin of safety for RBC?c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?Complete this question by entering your answers in the tabs below.Required ARequired BRequired CWhat is the break-even point in sales dollars for RBC? (Round intermediate calculations to 3 decimal places and your finalanswer to the nearest whole dollar.)Break-even point< Required ARequired B > Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC).Brewpubs provide two products to customers-food from the restaurant segment and freshly brewed beer from the beer productionsegment. Both segments are typically in the same building, which allows customers to see the beer-brewing process.After months of research, the owners created a financial model that showed the following projections for the first year of operations.Sales$ 763,2001,017,600339,200$2,120,000Вeer salesFood salesother salesTotal sales494,384$1,625,616Less cost of salesGross marginLess marketing and administrative expenses1,214,000$ 411,616Operating profitIn the process of pursuing capital through private investors and financial institutions, RBC was approached with several questions. Thefollowing represents a sample of the more common questions asked:• What is the break-even point?• What sales dollars will be required to make $110,000? To make $470,000?• Is the product mix reasonable? (Beer tends to have a higher contribution margin ratio than food, and therefore product mixassumptions are critical to profit projections.)• What happens to operating profit if the product mix shifts?• How will changes in price affect operating profit?• How much does a pint of beer cost to produce?It became clear to the owners of RBC that the initial financial model was not adequate for answering these types of questions. Afterfurther research, RBC created another financial model that provided the following information for the first year of operations.SalesBeer sales (368 of total sales)Food sales (48 of total sales)Other sales (16 of total sales)$ 763,2001,017,600339,200Total sales$2,120,000Variable CostsBeer (118 of beer sales)Food (308 of food sales)Other (318 of other sales)Wages of employees (248 of sales)Supplies (3% of sales)Utilities (5 of sales)Other: credit card, misc. (38 of sales)Total variable costsContribution margin83,952305, 280105,152508,80063,600106,00063,600$1,236,384883,616Fixed CostsSalaries: manager, chef, brewerMaintenance136,00024,00016,000Advertisingother: cleaning, menus, miscInsurance and accountingProperty taxesDepreciationDebt service (interest on debt)34,00030,00015,00085,000132,000Total fixed costs$ 472,000Operating profit411,616

This numerical has covered the concept of Cost Volume Profit Analysis.

Required: Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b. What is the margin of safety for RBC? c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?

Required: Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b. What is the margin of safety for RBC? c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 39P

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Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC). Brewpubs provide two products to customers—food from the restaurant segment and freshly brewed beer from the beer production segment. Both segments are typically in the same building, which allows customers to see the beer-brewing process. After months of research, the owners created a financial model that showed the following projections for the first year of operations. Sales Beer sales $ 882,000 Food sales 921,200 Other sales 156,800 Total sales $ 1,960,000 Less cost of sales 456,484 Gross margin $ 1,503,516 Less marketing and administrative expenses 1,056,400 Operating profit $ 447,116 In the process of pursuing capital through private investors and financial institutions, RBC was approached with several questions. The following represents a sample of the more common questions asked: What is the…
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