What is the break-even point in sales dollars for RBC?What is the margin of safety for RBC?What amount of sales dollars would be required to achieve an operating profit of $220,000? $420,000? It became clear to the owners of RBC that the Initlal 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 (48% of total sales)Food sales (48% of total sales)Other sales (12% of total sales)$832,000998, 400249,600Total sales$2,880, e00Variable CostsBeer (13% of beer sales)Food (34% of food sales)Other (29% of other sales)Wages of employees (21% of sales)Supplies (3% of sales)Utilities (4% of sales)$188,160339,45672, 384436, 80062,40083, 200Other: credit card, misc. (3% of sales)62,400Total variable costs$1,164, 800Contribution marginFixed Costs$ 915, 200$133, 00024,000Salaries: manager, chef, brewerMaintenanceAdvertising11,000Other: cleaning, menus, miscInsurance and accounting32, 00eProperty taxesDepreciationDebt service (interest on debt)39, 00023,00091,900127,000Total fixed costs$ 480, 000Operating profit435, 200 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.Sales832, e00998,400249,600Beer salesFood salesOther salesTotal sales$2,080, 000520, 000Less cost of salesGross marginLess marketing and administrative expenses$1,560, 0001,124, 800Operating profit$ 435, 200In the process of pursulng 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 polnt?• What sales dollars will be required to make $220,000? To make $420,000?• 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?

Break Even point refers to point at which the total costs and total revenue of a company are equal,…

Answered: What is the break-even point in sales…

What is the break-even point in sales dollars for RBC? What is the margin of safety for RBC? What amount of sales dollars would be required to achieve an operating profit of $220,000? $420,000?

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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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 $ 781,200 Food sales 1,074,150 Other sales 97,650 Total sales $ 1,953,000 Less cost of sales 525,358 Gross margin $ 1,427,642 Less marketing and administrative expenses 1,125,430 Operating profit $ 302,212 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 break-even point? What sales dollars…
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Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in Georgia and South Carolina. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store. a. Should the original purchase price of the land where the store will be located be included in the incremental earnings for the proposed new retail store? (Select from the drop-down menu.) b. Should the cost of demolishing the abandoned warehouse and clearing the lot be included in the incremental earnings for the proposed new retail store? (Select from the drop-down menu.) c. Should the loss of sales in the existing retail…
Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in Georgia and South Carolina. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store. Which of the following should be included as part of the incremental earnings for the proposed new retail store? a. The original purchase price of the land where the store will be located. b. The cost of demolishing the abandoned warehouse and clearing the lot. c. The loss of sales in the existing retail outlet, if customers who previously drove across town to shop at the existing outlet become customers of the new store instead.…
You are the Vice President for Operations at Taqueria Auténtica, an authentic Mexican taco restaurant expanding quickly throughout Texas. The company wants to invest in corporate owned chains for five years, prove the market concepts, and then sell them off as franchises after they have demonstrated proof of concept to potential owners. You have spent some time looking at potential locations in Granbury and Stephenville. Based on the specific locations the start-up costs would be $671,258 for Granbury, and $883.695 for Stephenville. The business risk at each location would be similar to risks at the overall corporation, and should require a weighted average cost of capital of 7.12%. The investment in one location does not affect the ability of the company to invest at the other location in any way. Calculate the net present value of both projects, and enter in the box below how much the value of the firm is expected to increase based on this capital budget (please enter the amount to…
Tamati has been pleased with the success at Fush in recent years and is thinking about expanding to a 2nd location across the city. Fush 2 will have a slightly different approach while maintaining the current culture and mission of the organisation. Tamiti is tentatively planning for the following four categories of revenue: - Beer and Wine. He estimates that 15,000 drinks will be served, with a selling price of $9 and the cost to produce the drink is $7 - Fish Dinners/ The fish dinner will sell for $19.50, with a cost of $15. Selling 20,000 meals - Dessert. Will sell for $8 at a cost of $6.50. Selling 9,500 units - Lunch specials. Selling 10,000 in the next year. lunch prices will average $10 with a cost of $8. Expenses of Fush per month in rent and utilities is $5,300 and monthly labour costs estimated $7,600 monthly (fixed cost in this case). What is the breakeven point in dollar
To generate leads for new business, Gustin Investment Services offers free financial planning seminars at major hotels in Southwest Florida. Gustin conducts seminars for groups of 25 individuals. Each seminar costs Gustin $3000, and the average first-year commission for each new account opened is $5800. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account. Determine the equation for computing Gustin’s profit per seminar, given values of the relevant parameters. Round your answers to the nearest dollar.Profit = (New Accounts Opened × $( ) – $ ( ) What type of random variable is the number of new accounts opened? (Hint: Review Appendix 16.1 for descriptions of various types of probability distributions.)The number of new accounts opened is a random variable with fill in the blank 4 trials and fill in the blank 5 probability of a success on a single trial. Assume that the number of new accounts…
To generate leads for new business, Gustin Investment Services offers free financial planning seminars at major hotels in Southwest Florida. Gustin conducts seminars for groups of 25 individuals. Each seminar costs Gustin $3000, and the average first-year commission for each new account opened is $4600. Gustin estimates that for each individual attending the seminar, there is a 0.01 probability that he/she will open a new account. Determine the equation for computing Gustin’s profit per seminar, given values of the relevant parameters. Round your answers to the nearest dollar.Profit = (New Accounts Opened × $ fill in the blank 1) – $ fill in the blank 2 What type of random variable is the number of new accounts opened? (Hint: Review Appendix 16.1 for descriptions of various types of probability distributions.)The number of new accounts opened is a random variable with fill in the blank 4 trials and fill in the blank 5 probability of a success on a single trial. Assume that the…
Home Builder Supply, a retailer in the home improvement industry, currently operates seven retail outlets in the Maritimes. Management is contemplating building an eighth retail store across town from its most successful retail outlet. The company already owns the land for this store, which currently has an abandoned warehouse located on it. Last month, the marketing department spent $15,000 on market research to determine the extent of customer demand for the new store. Now Home Builder Supply must decide whether to build and open the new store. Which of the following should be included as part of the incremental earnings for the proposed new store? a. The original purchase price of the land where the store will be located. b. The cost of demolishing the abandoned warehouse and clearing the lot. c. The loss of f sales in the existing retail outlet, if customers who previously drove from Dartmouth to Halifax to shop at the existing outlet become customers of the new store instead. d.…
Crawford’s Books and Things has a traditional bookstore housed downtown Charlotte. The store has been there forty years, and many customers love the fact that they can hold the books in their hands and browse the offerings. Crawford’s just started an online book division for people who like to order books online. EVA for the Charlotte store is about $13 million, while EVA for the online division shows a value of –$2.2 million. Which measures for the customer and internal processes dimensions of the balanced scorecard would be appropriate for the online division? A. customer measure might be the percent of customers making repeat purchases; an internal process measure might be the number of times per month that the website is down. B. customer measure might be time to deliver books; an internal process measure might be the percentage of website visits that translate into sales. C. customer measure might be the number of new customers who come via recommendations from existing ones;…