An entrepreneur is considering opening a coffee shop in downtown Pasadena. The building that he is considering will have a monthly lease payment of $3200 and basic utility costs of $600-per month. Two employees will be hired at $10.00/hour/employee (including overhead and benefits). Each employee will work an average of 170 hours per month. The average revenue per customer is estimated at $7.00. The variable cost of serving each customer is estimated at $2.00. (a) Calculate how many customers per month it will take for the coffee shop owner to breakeven. (b) How many customers would need to be served per month to achieve a monthly profit of $5,000?

An entrepreneur is considering opening a coffee shop in downtown Pasadena. The building that he is considering will have a monthly lease payment of $3200 and basic utility costs of $600-per month. Two employees will be hired at $10.00/hour/employee (including overhead and benefits). Each employee will work an average of 170 hours per month. The average revenue per customer is estimated at $7.00. The variable cost of serving each customer is estimated at $2.00. (a) Calculate how many customers per month it will take for the coffee shop owner to breakeven. (b) How many customers would need to be served per month to achieve a monthly profit of $5,000?

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 11E

See similar textbooks

Similar questions

1. A recently retired professor, Melinda Marketing, plans to establish the Hot-Air FanCompany and manufacture circulating fans. She estimates the fixed cost of operations tobe $357,500 annually. The variable cost of producing the fans is forecasted to be $85 perunit.a. How many fans must be sold to break even if the fans are priced at $150?b. If Hot-Air sells 6,000 fans, what will be the EBIT?c. If Hot-Air sells 6,000 fans and has interest expense of $8,125, what is Hot-Air’stimes-interest-earned? Hot-Air does not have any nonoperating expenses.d. If the fans are priced at $150, what is Hot-Air’s breakeven sales? 2. Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000, and its tax rate is 40 percent. Vapor Lock’s beta is 1.5. a. What is Vapor Lock’s DFL? b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentage increase in net income? c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resulting net income? 3. A…
2. Vincent is leasing 100 units of market space in zamboanga city. He computed his fixed costscat P320,000 monthly. He is leasing each space at P14,000 monthly. He spends aroundvP2,950 per rented space monthly for the maintenance. How many spaces must be rented monthly to breakeven? If vincent is targeting a minimum monthly profit of P500,000, how many spaces must be leased? 3. Jane manufactures soft leathers. She spends around P315 per square foot of leather produced and sells it at P300 per square foot. Also, she knows that her fixed costs amount to P1,400,000. What is the minimum number of square feet sold to be able to breakeven? If she only sold 6,000 square feet of leather, did she earn profit? If yes, how much? If no, how much money did she lose?
A recently retired professor, Melinda Marketing, plans to establish the Hot-Air FanCompany and manufacture circulating fans. She estimates the fixed cost of operations tobe $357,500 annually. The variable cost of producing the fans is forecasted to be $85 perunit.a. How many fans must be sold to break even if the fans are priced at $150?b. If Hot-Air sells 6,000 fans, what will be the EBIT?c. If Hot-Air sells 6,000 fans and has interest expense of $8,125, what is Hot-Air’stimes-interest-earned? Hot-Air does not have any nonoperating expenses.d. If the fans are priced at $150, what is Hot-Air’s breakeven sales?
You are the manager of an apartment complex with 100 units. When you set the rent at $1600 per month, all apartments are rented. As you increase rent by $50 per month, on average, 2 fewer apartments are rented. Maintenance costs run $200 per month for each occupied unit. What is the rent that maximizes the total amount of profit? Answer:
Plank, the new owner of the vehicle accessory shop, is considering buying sets of winter tyres for $ 299 per set and selling them at $ 520 each. Fixed costs related to this operation amount to $ 3250 per month. It is expected that 18 sets per month could be sold. How much profit will Plank make each month? Hint: use the contribution margin approach.
Planck, the new owner of the vehicle accessory shop, is considering buying sets of winter tyres for $ 299 per set and selling each set at $ 520. Fixed costs related to this operation amount to $ 3250 per month. It is expected that 18 sets per month could be sold. How much profit will Planck make each month? Round to the nearest one. Hint: use the contribution margin approach.
43) A recently retired professor, Melinda Marketing, plans to establish the Hot-Air Fan Company and manufacture circulating fans. She estimates the fixed cost of operations to be $357,500 annually. The variable cost of producing the fans is forecasted to be $85 per unit. a. How many fans must be sold to break even if the fans are priced at $150? b. If Hot-Air sells 6,000 fans, what will be the EBIT? c. If Hot-Air sells 6,000 fans and has interest expense of $8,125, what is Hot-Air’s times-interest-earned? Hot-Air does not have any nonoperating expenses. d. If the fans are priced at $150, what is Hot-Air’s breakeven sales?
esc You plan on starting a lawn mowing business by investing $700 of your own money and purchasing $500 of equipment. You plan to work 80 hours in your first month and 370 hours in your second month of business. You charge your customers $24 per hour. Your anticipated costs include: Advertising Gas Depreciation Assistant's Wages Miscellaneous Expenses You plan on collecting 90% of your sales in the month you mow the lawn and the remainder in the following month. Calculate the accounts receivable balance at the end of your second month of business. Click Save and Submit to save and submit. Click Save All Answers to save all answers. 1 Q A 2 W $8 per month $1.40 per hour $25 per month $8.00 per hour $40 per month S # 3 E D $ 4 R 67 dº % 5 LL MacBook Pro T < 6 G & Y 7 H * 00 8 U J o
You work for a sprinkler manufacturing company. You want to propose the manufacturing of a new type of sprinkler head. The manufacuring process has a fixed annual cost of $750,000. If you want to charge $275 per sprinkler head, and each sprinkler head costs $205 to manufacture, how many sprinkler heads will you need to sell in order to break even? 9,882 sprinkler heads 10,715 sprinkler heads 7,515 sprinkler heads 15,312 sprinkler heads
Given a project with the following characteristics, answer the following questions: You are the project manager of a project to plant trees on the sidewalks of the local community. Your project is scheduled to last for 6 months. You are to plant (thirty) 30 trees each month. Each tree is planned to cost R1 000. It is now the last day of month 3. You have planted 80 trees and your CPI is 1.11. 1. What is the actual cost of the project right now? 2. What is the current schedule performance index (SPI) of the project? 3. How is the project currently performing in terms of budget and schedule? Motivate your answer. 4. What is the percentage of the project that is currently complete. What should be reported?
Parsa Real Estate is a company that buys and rents real estate. The company is looking into buying an office building for $1M. The building has 10,000 square feet of rentable office space. The company analysts predict that they can rent the office space for $6 per square foot per month, but demand is a function of price in the following way: % Occupied = 2 - 0.2*Rent (Rent is in dollars per square foot per month. Also, at $6.00, Oscar thinks he can fill about 80% of the office space.) The building needs to be maintained (security, insurance, maintenance, etc.), which costs $10,000 per month regardless of occupancy. Also, there is a variable cost of $2 per month for each square foot occupied. Define the return on invested capital as the ratio of the profits (PER YEAR) and the invested capital. You can draw an ROIC tree in the same way that we drew a KPI tree in class. Simply have the ROIC as “the root” of the tree instead of profits. Then answer the following question. What is the ROIC?
Russ has developed a new device, which he hopes to produce and market on a large scale. Russ will rent a production space for P500 per month and rent production equipment for P800 per month. Russ estimates the material cost per unit will be P5 and the labour cost per unit, P3. Advertising and promotion will cost P900 per month. He will hire workers and spend his time promoting the product. Advertising and promotion is a? a. Variable product cost b. fixed product costc. fixed period costd. variable period cost