Eastern Motors Auto Dealership wanted to estimate the average CLV over a 5 year timehorizon of a customer who purchases a new vehicle. The average vehicle sells for $25,658and has a margin of 7%. Based on historical averages, 88% of people buying a new vehicleat Eastern will return for service 7 times over the next 5 years. Though it variesconsiderably, Eastern generates approximately $98 in margin on each service visit afteraccounting for parts and direct labor costs.Not including service, what is the average dollar margin for each new vehiclesold?

INTRODUCTION: The gross margin ratio, which compares a company's gross margin to its net sales,…

Answered: Eastern Motors Auto Dealership wanted…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Palmer Acres Inn is trying to determine its break-even point during its off-peak season. The inn has 50 rooms that it rents at $ 55 a night. Operating costs are as follows. Salaries $ 5,100 per month Utilities $ 1,400 per month Depreciation $ 1,100 per month Maintenance $ 1,464 per month Maid service $ 11 per room Other costs $ 22 per room Determine the inn’s break-even point in number of rented rooms per month. Break-even point enter the break-even point in number of rented rooms per month rooms eTextbook and Media Determine the inn’s break-even point in dollars. Break-even point $enter the break-even point in dollars
J. Smythe, Incorporated, manufactures fine furniture. The company is deciding whether to introduce a new mahogany dining room table set. The set will sell for $6,130, including a set of eight chairs. The company feels that sales will be 2,600, 2,750, 3,300, 3,150, and 2,900 sets per year for the next five years, respectively. Variable costs will amount to 48 percent of sales and fixed costs are $1,880,000 per year. The new tables will require inventory amounting to 13 percent of sales, produced and stockpiled in the year prior to sales. It is believed that the addition of the new table will cause a loss of 550 tables per year of the oak tables the company produces. These tables sell for $4,200 and have variable costs of 43 percent of sales. The inventory for this oak table is also 13 percent of sales. The sales of the oak table will continue indefinitely. J. Smythe currently has excess production capacity. If the company buys the necessary equipment today, it will cost $16,000,000.…
Solar Engines manufactures solar engines for tractor-trailers. Given the fuel savings available, new orders for 170 units have been made by customers requesting credit. The variable cost is $11,000 per unit, and the credit price is $13,500 each. Credit is extended for one period. The required return is 1.6 percent per period. If Solar Engines extends credit, it expects that 15 percent of the customers will be repeat customers and place the same order every period forever and the remaining customers will be one-time orders. Calculate the NPV of the decision to grant credit. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
A 90-room motel has an average room rate of $64 and average occupancy of 77%. Its fixed costs are $800,000 a year, and its variable costs total $500,000. The owner wants to increase operating income from current level to $250,000. She decides to do the following adjustments: increase price by $6 spend $30,000 more per year on marketing to compensate for the higher room rate To motivate the staff, the owner also set a $2,000 reward to the best employee Send guest fruits to each room, which costs $5 per room How many rooms does she need to sell per night?
A restaurant has 145 seats needs $60,000 to earn the annual interest payment to the bank. Its monthly fixed labor cost is $7,800 along with other annual fixed cost of $270,000. It has a guest check average of $22 and per guest average cost of $15.50. What revenue is needed to cover all costs? What average daily seat turnover will be needed, assuming the operation is closed 3 days a year?
A car rental agency rents 200 cars per day at a rate of $30 per day. For each $1 reduction, 10 more cars are rented. At what rate should the cars be rented to produce the maximum revenue? What is the maximum revenue?
Avocado Company sells guitars to Mexican restaurants. The guitars sell for $600, and the fixed monthly operating costs are as follows: Rent and utilities $4800 Wages and benefits to employees 2300 Other expenses 485 Avocado understand that for every dollar of sales, $0.65 went to cover fixed costs, and anything above that point was profit. What is the amount of revenue that Avocado should earn each month to break even? (Round your answer to the nearest dollar.) O $4285 O $4769 O $5515 O $10,243
Zozan Corp. manufactures Hydrogen engines automobiles. Recently 450 new orders placed by customers requesting credit. The variable cost is $35,000 per unit, and the credit price is $43,000 each. Credit is extended for one period, and based on historical experience, payments for 20% of the orders are never collected. The required return is 4% per period. Assuming a repeat customer, should it be filled by the firm? The customer will not buy if credit is not extended
A. How many trips must Bristol sell every month to break even? B. Bristol's owner believes that 350 trips is a reasonable forecast of the average monthly demand. What is the margin of safety in term of the number of airport trips?
can you help me with the last two problems
You own and manage a yard care business in which you charge $50 per visit to care for each yard (your revenue). Your labor, fuel, and other variable costs are 31.1% of revenue, and you have $60,000 in fixed costs. How many visits to care for yards must you perform in a year to break even?
bed Cruse Cleaning offers residential and small office cleaning services. An average cleaning service has the following price and costs. Sales price Variable costs Fixed costs $127.00 per service 89.00 per service 119,548 per year Cruse Cleaning is subject to an income tax rate of 22 percent. Required: a. How many cleaning services must Cruse Cleaning sell in a year to break even? ook b. How many cleaning services must Cruse Cleaning sell in a year to earn an annual operating profit of $32,604 after taxes? a Required sales in a year to break even int rences b. Required sales in a year to earn an annual operating profit of $32,604 after taxes: cleaning services cleaning services

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