Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 16E
To determine
Break-even point: The point where the total cost line intersects the sales line is called the break-even point on the graph. It is point where a company is neither making profit nor incurring any loss.
1. The Break-Even point in persons
2. The ticket price per person to break-even
3. The CVP graph
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The Museum of Natural Science is preparing for its annual appreciation dinner for contributing members. Last year, 500 members attended the dinner. Tickets for the dinner were $20 per attendee.
The profit report for last year's dinner follows.
(Click the icon to view the profit report.)
This year the dinner committee does not want to lose money on the dinner. To help achieve its goal, the committee analyzed last year's costs. Of the $11,000 cost of the dinner, $6,000 were fixed
costs and $5,000 were variable costs. Of the $3,000 cost of invitations and paperwork, $2,500 were fixed and $500 were variable.
Read the requirements.
Requirement 1. Prepare last year's profit report using the contribution margin format. (Use parentheses or a minus sign when entering losses.)
Ticket sales
Variable cost of dinner
Variable invitations and paperwork
Contribution margin
Fixed cost of dinner
Fixed invitations and paperwork
Profit (loss)
5000
500
6000
2500
10000
5500
4500
8500
-4000
(...)
Requirement…
ality is working on following two mutually exclusive proposals for increasing
and optimizing the traffic lighting. Find the best option by using the
Benefit/Cost ratio analysis given that the MARR
10%.
Project-I
Project-II
Initial cost ($)
900,000
1,700,000
Annual operating cost ($/ per year)
120,000
60.000
Annual benefit ($ / per year)
730,000
650,000
Annual disbenefit ($ / per year)
300,000
195,000
Life (years)
10
25
Relevant Cost Irrelevant Cost
or Benefit
Opportunity
Cost
Sunk Cost
or Benefit
$40,000 salary from Shelton
Anticipated $48,000 salary with an accounting degree
Tuition and books for years 1-3 of college
Cost to relocate to Seattle
Tuition and books for remaining two semesters
$19,000 from your part-time job, which you plan to keep until
you graduate
Cost to rent an apartment in Seattle (assume you are currently
living at home with your parents)
Food and entertainment expenses, which are expected to be
the same in Seattle as where you currently live
Increased promotional opportunities that will come from having
a college degree
Chapter 6 Solutions
Introduction To Managerial Accounting
Ch. 6.A - The Cheyenne Hotel in Big Sky, Montana, has...Ch. 6.A - Least-Squares Regression LOS11 Bargain Rental Car...Ch. 6.A - Prob. 3ECh. 6.A - Archer Company is a wholesaler of custom-built...Ch. 6.A - George Caloz&Freres, located in Grenchen,...Ch. 6.A - Least-Square. Regression; Scattergraph; Comparison...Ch. 6.A - Cost Behaviour; High4æw Method; Contribution...Ch. 6.A - Nova Company’s total overhead cost at various...Ch. 6.A - High-Low Method; Contribution Format Income...Ch. 6.A - Least-Squares Regression Method; Scattergraph;...
Ch. 6.A - Mixed Cost Analysis and the Relevant Range LOS-10...Ch. 6.A - Prob. 12PCh. 6 - What is the meaning of contribution margin ratio?...Ch. 6 - Prob. 2QCh. 6 - In all respects, Company A and Company B are...Ch. 6 - What is the meaning of operating leverage?Ch. 6 - What is the meaning of break-even point?Ch. 6 - In response to a request from your immediate...Ch. 6 - What is the meaning of margin of safety?Ch. 6 - Prob. 8QCh. 6 - Explain how a shift in the sales mix could result...Ch. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - The Excel work sheet from that appears below is to...Ch. 6 - Prob. 3AECh. 6 - The Excel worksheet form that appears be1o is to...Ch. 6 - Prob. 5AECh. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Prob. 11F15Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - Oslo Company prepared the following contribution...Ch. 6 - The Effect of Cha noes ¡n Activity on Net...Ch. 6 - Prob. 2ECh. 6 - Prepare a Profit Graph L062 Jaffre Enterprises...Ch. 6 - Computing and Using the CM Ratio L063 Last month...Ch. 6 - Changes in Venable Costs, Fixed Costs, Selling...Ch. 6 - Prob. 6ECh. 6 - Lin Corporation has a single product 1ose selling...Ch. 6 - Compute the Margin of Safety LO6-7 Molander...Ch. 6 - Compute and Use the Degree 01 Operating Leverage...Ch. 6 - Prob. 10ECh. 6 - Missing Data; Basic CVP Concepts L061, L069 Fill...Ch. 6 - Prob. 12ECh. 6 - Change in selling price, Sales Volume, Variable...Ch. 6 - Prob. 14ECh. 6 - Operating Leverage 1061. 1068 Magic Realm, Inc.,...Ch. 6 - Prob. 16ECh. 6 - Break-Even and Target Profit Analysis 1064, 1066,...Ch. 6 - Break-Even and Target Profit Analysis; Margin of...Ch. 6 - Prob. 19PCh. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - CVP Applications; Contribution Margin Ratio:...Ch. 6 - Break-Even and Target Profit Analysis LO6-6, L066...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Sales Mix; Commission Structure; Multiproduct...Ch. 6 - Changes in Cost Structure; Break-Even Analysis;...Ch. 6 - Graphing; Incremental Analysis; Operating Leverage...Ch. 6 - Interpretive Questions on the CVP Graph L062, L065...
Knowledge Booster
Similar questions
- A library shelving system has a first cost of $20,000 and a useful life of 10 years. The annual maintenance is expected to be $2,500. The annual benefits to the library staff are expected to be $9,000. If the effective annual interest rate is 10 percent, what is the benefit/cost ratio of the shelving system? Select one: a. 2.24 b. 1.73 с. 1.56 d. 1.51arrow_forwardQuestion 9, P1-4 (book/static) Part 1 of 5 Marginal cost-benefit analysis and the goal of the firm Wendy Winter needs to determine whether the current warehouse system should be upgraded to a new system. The new system would require an initial cash outlay of $250,000. The current system could be sold for $55,000. The monetary benefit of the new system over the next five years is $325,000, while the monetary benefit of the current system over the same period is $125,000. Furthermore, it is expected that the firm's stock price will increase if the new system is implemented because it will make the firm more cost efficient and cost effective in the long run. a. Identify and describe the analysis Wendy should use to make the decision. b. Calculate the marginal benefit of the proposed new warehouse system. c. Calculate the marginal cost of the proposed new warehouse system. d. What should Wendy's recommendation to the firm be regarding the new warehouse system? Explain your recommendation.…arrow_forwardRequired information Exercise 6-16 (Algo) Break-Even Analysis and CVP Graphing [LO6-2, LO6-4, LO6-5] [The following information applies to the questions displayed below.] The Hartford Symphony Guild is planning its annual dinner-dance. The dinner-dance committee has assembled the following expected costs for the event: Dinner (per person) Favors and program (per person) Band Rental of ballroom Professional entertainment during intermission Tickets and advertising The committee members would like to charge $40 per person for the evening's activities. Exercise 6-16 (Algo) Part 1 $ 21 $ 2 $ 1,275 $ 510 1. Break-even point 2. Ticket price per person to break even Required: 1. What is the break-even point for the dinner-dance (in terms of the number of persons who must attend)? 2. Assume that last year only 200 persons attended the dinner-dance. If the same number attend this year, what price per ticket must be charged in order to break even? (Round your answer to the nearest whole dollar…arrow_forward
- Assume the local DHL delivery service hub has the following information available about fleet miles and operating costs: Year Miles Operating Costs 2012 556,000 $182,000 2013 684,000 214,000 Use the high-low method to develop a cost-estimating equation for total annual operating costs. (Let X = annual fleet miles.) Total annual costs = $0 +$ 0arrow_forward5.4General Hospital, a not-for-profit acute care facility, has the following cost structure for its inpatient services: Fixed costs $10,000,000 Variable cost per inpatient day 200 Charge (revenue) per inpatient day 1,000 The hospital expects to have a patient load of 15,000 inpatient days next year. a.Construct the hospital’s base case projected P&L statement. b.What is the hospital’s breakeven point? c.What volume is required to provide a profit of $1,000,000? A profit of $500,000? d.Now assume that 20 percent of the hospital’s inpatient days come from a managed care plan that wants a 25 percent discount from charges. Should the hospital agree to the discount proposal?arrow_forwardThe expected costs for the Maintenance Department of Stazler, Inc., for the coming year include: Fixed costs (salaries, tools): 64,900 per year Variable costs (supplies): 1.35 per maintenance hour Estimated usage by: Actual usage by: Required: 1. Calculate a single charging rate for the Maintenance Department. 2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. 3. What if the Assembly Department used 4,000 maintenance hours in the year? How much would have been charged out to the three departments?arrow_forward
- guests. Select the graph that depicting fixed costs, variable costs, and total costs for each event versus the number of guests. (Enlarge each graph before selecting your answer.) A. $55,000+ $50,000- $45,000 $40,000 X $20,000- $15,000 $10,000- $5,000 $0 0 Total costs Variable cos Fixed costs 100 200 300 Number of attendees B. $55,000+ $50,000 $45,000- $40,000 $35,000 O $25,000 $20,000- $15,000 $10,000 $5,000- $0+ 0 → For 130 attendees, the total cost will be Total costs Fiked costs variable cos 100 200 300 Number of attendees 8 $55,000+ $50,000 $45,000- $40,000 $35.000 $30,000 $25,000 $20,000-9 $15,000 $10,000 $5,000 $0- Total sets Eiked costs Variable cos 100 200 300 0 Number of attendees D. and the cost per attendee will be $55,000+ $50,000 $45,000- 2283000 $25.000 $20.000 $15.000- $10,000- $5,000 $0 Requirement 2. Suppose 130 persons attend the next event. What is Apprentice Training's total net cost and the cost per attendee? (Round your answers to the nearest cent.) Totaboots…arrow_forward17 Using the figure below, calculate the percentage of revenue to the lender based on the monthly construction draw schedule. The project assumes a discount rate of 10%, and is for a 25-acre tract of land outside Lexington, KY. Construction Sales Revenue Month Draw (Lot Sales) 01234567899 509,600 0 327,600 0 327,600 0 327,600 0 109,200 226,100 109,200 226,100 109,200 226,100 0 455,525 0 455,525 0 455,525 0 455,525 The % of revenue to the lender is O.137.4% 72.8% 131.2% 76.2%arrow_forwardPlease answer question 3 I have been asking for hours to get question 3 solve. my questions are using up and I am not getting the solutions I want. i am not pleased with that. i will like to have question 3 answered. 3) Briefly explain sensitivity analysis/cost-volume-profit analysis using the solutions received from the questions above? Caribo produces and markets wheelbarrows for the Caribbean market.The following are estimates relating to its 2019 budget:Selling Price---------------------------------$1000Variable cost per wheelbarrow------------$500Fixed annual cost----------------------------$150000Nett Profit (After tax)-----------------------$300000Income tax rate-------------------------------25%The mid-year review of the income statement revealed that sales were not at the expected level.For the six months of the year to June 2019, 350 units were sold at the estimated selling pricewith variable cost as planned. However, the net profit projection for 2019 would not beachieved…arrow_forward
- Required information Exercise 5-16 Break-Even Analysis and CVP Graphing [LO5-2, LO5-4, LO5-5] [The following information applies to the questions displayed below.] The Hartford Symphony Guild is planning its annual dinner-dance. The dinner-dance committee has assembled the following expected costs for the event: Dinner (per person) Favors and program (per person) Band Rental of ballroom Professional entertainment during intermission. Tickets and advertising Exercise 5-16 Part 1 $ The committee members would like to charge $40 per person for the evening's activities. 1. Break-even point 2. Ticket price per person to break even 23 4 persons 780 390 $ $ 260 $1,170 Required: 1. What is the break-even point for the dinner-dance (in terms of the number of persons who must attend)? 2. Assume that last year only 100 persons attended the dinner-dance. If the same number attend this year, what price per ticket must be charged in order to break even?arrow_forwardAdvanced Technology, Payback, NPV, IRR, Sensitivity Analysis Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: Decreased waste $300,000 Increased quality 400,000 Decrease in operating costs 600,000 Increase in on-time deliveries 200,000 The system will cost $9,000,000 and last 10 years. The company's cost of capital is 12 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Calculate the payback period for the system.fill in the blank 1 years Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Round your IRR answers to the nearest whole percentage value (for example, 15.6% rounds to 16% and should be entered as…arrow_forwardble cost per unit 1.3 ginal income per REQUIRED Use the information provided below to calculate the following independently: 1.3.1 Net profit 1.3.3 Marginal income per unit that will enable the project to break even 1.3.2 Break-even quantity if the selling price increases to R130 per unit INFORMATION Caprice Limited plans to start Project Star and the following are the forecasts for 2024 Sales Direct materials cost per unit Direct labour cost per unit Variable selling costs Manufacturing overhead costs (all fixed) Fixed selling and administrative costs 50 000 units at R120 per unit R36 R24 10% of sales R841 000 R1 040 000 (2 marks) (2 marks) (4 marks)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning