Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 7, Problem 7.37AE
Comprehensive CVP analysis (Learning Objectives 1, 2, 3, 4, & 5)
Marcus Allen is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Marcus can buy the premium wax at a wholesale cost of $29 per tub. He plans to sell the premium wax for $84 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $880 per car show.
Requirements
- 1. Determine the number of tubs Marcus must sell per show to break even.
- 2. Assume Marcus wants to earn a profit of $1,320 per show.
- 3. Determine the sales volume in units necessary to earn the desired profit.
- 4. Determine the sales volume in dollars necessary to earn the desired profit.
- 5. Using the contribution margin format, prepare an income statement (condensed version) to confirm your answers to parts a and b.
- 6. Determine the margin of safety between the sales volume at the breakeven point and the sales volume required to earn the desired profit. Determine the margin of safety in both sales dollars, units, and as a percentage.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
(Learning Objective 2: Distinguish a capital expenditure from an immediate expense)LimeBike, located in San Mateo, California, is a startup founded in 2017. Its mission isto make shared bicycles accessible and affordable. The company has taken the basic idea ofshared bicycles and eliminated the need to return the bike to a docking station, which may notbe near the cyclist’s destination. LimeBike charges $1 per 30 minutes of riding, or $0.50 perride for students.To use LimeBike, you first use the LimeBike app to locate one of the citrus-colored bikesnear your location. Once you are at the bike, you scan the QR code on the bike or enter thebike’s plate number into the app to unlock the bike. When you are finished using the bike, youpark the bike by a bike rack or post––anywhere that is legal and visible. Once you press downthe back-wheel lock, the trip is finalized and your payment is processed by LimeBike’s app.LimeBike does not depend on government funding, making it appealing to…
You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process:
Costs/Benefits
College Course
Community Course
Cost
$4,300
$1,190
Distance to course
0.20 miles (walking distance)
18 miles (driving distance)
Timing of course
Weekday
Weekend
Number of meetings
16
8
Qualitative considerations
Convenience, quality of instruction
Flexibility, brief duration
Pretend transportation (gas, mileage, and parking) cost $220 per class session at the library. If you consider solely the cost - including transportation - of each alternative, which would you choose?
Multiple Choice
College course
Community course
Both alternatives
Neither alternative
You run a business out of your dorm room selling ACC2020 textbooks in both paper and digital versions. The paper version costs you $400 and you can sell it for $600. The digital version costs you $100 and you can sell it for $200.
Last semester you sold 10 paper versions and 100 digital versions for total sales of $26,000. You expect that sales mix will continue this semester.
- If your semester fixed costs are $6,000 for a publisher's license, what dollar amount of sales will you need to breakeven?
- How many paper and digital books will you have to sell to break even?
- How much operating income did you have last semester?
Chapter 7 Solutions
Managerial Accounting (5th Edition)
Ch. 7 - (Learning Objective 1) The contribution margin is...Ch. 7 - (Learning Objective 1) The contribution margin...Ch. 7 - (Learning Objective 2) The formula to find the...Ch. 7 - Prob. 4QCCh. 7 - Prob. 5QCCh. 7 - Prob. 6QCCh. 7 - (Learning Objective 4) Which of the following is...Ch. 7 - Prob. 8QCCh. 7 - Prob. 9QCCh. 7 - Prob. 10QC
Ch. 7 - Compute unit contribution margin and contribution...Ch. 7 - Prob. 7.2SECh. 7 - Prob. 7.3SECh. 7 - Find target profit volume (Learning Objective 2)...Ch. 7 - Prob. 7.5SECh. 7 - Prob. 7.6SECh. 7 - Prob. 7.7SECh. 7 - Prob. 7.8SECh. 7 - Compute margin of safety (Learning Objective 5)...Ch. 7 - Compute and use operating leverage factor...Ch. 7 - Calculate breakeven and target profit sales...Ch. 7 - Prob. 7.12SECh. 7 - Prob. 7.13SECh. 7 - Prob. 7.14SECh. 7 - Compute margin of safety (Learning Objective 5)...Ch. 7 - Compute and use operating leverage factor...Ch. 7 - Prob. 7.17SECh. 7 - Prob. 7.18SECh. 7 - Prepare contribution margin income statements...Ch. 7 - Work backward to find missing information...Ch. 7 - Find breakeven and target profit volume (Learning...Ch. 7 - Prob. 7.22AECh. 7 - Prob. 7.23AECh. 7 - Prob. 7.24AECh. 7 - Prob. 7.25AECh. 7 - Prob. 7.26AECh. 7 - Sustainability and CVP concepts (Learning...Ch. 7 - Prob. 7.28AECh. 7 - Calculate contribution margin and breakeven...Ch. 7 - Prob. 7.30AECh. 7 - Extension of E7-30A: Multiproduct firm (Learning...Ch. 7 - Prob. 7.32AECh. 7 - Breakeven and an advertising decision at a...Ch. 7 - Prob. 7.34AECh. 7 - Prob. 7.35AECh. 7 - Prob. 7.36AECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Prob. 7.39AECh. 7 - Prob. 7.40BECh. 7 - Work backward to find missing information...Ch. 7 - Find breakeven and target profit volume (Learning...Ch. 7 - Prob. 7.43BECh. 7 - Prob. 7.44BECh. 7 - Prob. 7.45BECh. 7 - Prob. 7.46BECh. 7 - Continuation of E7-46B: Changing business...Ch. 7 - Sustainability and CVP (Learning Objective 3)...Ch. 7 - Prob. 7.49BECh. 7 - Prob. 7.50BECh. 7 - Prob. 7.51BECh. 7 - Prob. 7.52BECh. 7 - Find breakeven for a multiproduct firm (Learning...Ch. 7 - Breakeven and an advertising decision at a...Ch. 7 - Compute margin of safety and operating leverage...Ch. 7 - Use operating leverage factor to find fixed costs...Ch. 7 - Prob. 7.57BECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Prob. 7.59BECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.62APCh. 7 - Prob. 7.63APCh. 7 - Prob. 7.64APCh. 7 - Prob. 7.65APCh. 7 - Prob. 7.66APCh. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.68BPCh. 7 - Comprehensive CVP problem (Learning Objectives 1,...Ch. 7 - Prob. 7.70BPCh. 7 - Prob. 7.71BPCh. 7 - CVP analysis at a multiproduct firm (Learning...Ch. 7 - Prob. 7.73SCCh. 7 - Discussion Questions 1. Define breakeven point....Ch. 7 - Prob. 7.75ACTCh. 7 - Prob. 7.76ACTCh. 7 - Prob. 7.77ACT
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Please help!!! You run a business out of your dorm room selling ACC2020 textbooks in both paper and digital versions. The paper version costs you $400 and you can sell it for $600. The digital version costs you $100 and you can sell it for $200. Last semester you sold 10 paper versions and 100 digital versions for total sales of $26,000. You expect that sales mix will continue this semester. - If your semester fixed costs are $6,000 for a publisher's license, what dollar amount of sales will you need to breakeven? - How many paper and digital books will you have to sell to break even? - How much operating income did you have last semester?arrow_forwardQUESTION: This class has 60 students. Each student is going to order a Tesla Model Y (Please do not actually order a car, this is just a hypothetical question). For simplicity, we will assume the following: . The price of each car is $60,000 (before sales tax) The deposit required while ordering is $10,000. • Sales tax are 6.00% (assessed when the car is delivered) Final payment is due when car is delivered. . . The following is a summary of the transactions that occurred: •April 7-all 60 students made their orders and paid the $10,000 required deposit. April 14-40 cars are delivered and the students pay the remaining balance. April 21- the remaining 20 cars are delivered. The students only pay the sales tax. Tesla finances the remaining balance for each student with a 180-day 5.00% short-term note payable. • October 18-all 20 students pay the note payable to Tesla and the accrued interest. . . REQUIRED: Record proper journal entries for TESLA for the above four transactions. Journal…arrow_forwardTHE PICTURE IS THE EXCEL TEMPLATE YOU MUST FILL OUT Suppose that you borrowed $25,000 student loans from Sallie Mae to attend UM - Dearborn. Once you graduate, you are required to start paying your loan and interest. The APR for your loan is 5.54%. Each month you will have to make interest payment and principal repayment. Suppose that you can choose the following two repayment plans: Standard repayment plan: if you choose this plan, you will have to pay off your loan in 10 years with the same amount of payment each month. Fixed extended repayment plan: if you choose this plan, you will be allowed to pay off your loan in 25 years with the same amount of payment each month. 1. Please use Excel to work on the following questions: How much should you pay each month for these two plans? • Set up the loan amortization tables for these two plans. How much interest will you pay in total when you pay off your loan for these two plans? • Amortization Schedule for your Student Loan (Standard…arrow_forward
- Consider the following hypothetical sales scenario. A large community college buys and takes delivery of 50 iMac computers from a local Apple store. The invoiced price is $2,800 per unit and includes hardware, software essential to the functionality of the hardware, third-party software including Microsoft Office for Mac and Adobe Creative Suite, and two years of tech service and support. Apple uses vendor-specific objective evidence to determine unit prices of $2,500 and $300 for hardware and the essential software, respectively. The third-party software typically retails for $500 (but Apple purchases it at a 50% discount) and equivalent service and support contracts are $100 per year. The customer (the community college) can opt to purchase subsequent essential software and OS upgrades. Indicate how Apple should record gross revenue for the transaction at the time the customer takes delivery of the computers. Your response should include specific dollar amounts.arrow_forwardLime (formerly known as LimeBike), located in San Mateo, Califomia, is a startup founded in 2017. Its mission is to make shared bicycles accessible and affordable. The company has taken the basic idea of shared bicycles and eliminated the need to return the bike to a docking station, which may not be near the cyclist's destination. Lime charges $1 per 30 minutes of riding, or $0.50 per ride for students. (Click the icon to view additional information.) Read the requirements. Requirement 1. For each of the following items, identify whether the cost of the item would be expensed or capitalized at Lime: Item a. Customized bikes from Trek and Specialized b. Development costs of Lime's app for locating, paying, and returning bikes c. Salary of the salesperson who works to get cities to adopt Lime's program d. Replacement tires for bikes e. Routine bike maintenance including chain lubrication, brake pad replacement, and drivetrain cleaning f. Electricity and other utilities in the company's…arrow_forwardMarcus Allen is evaluating a business opportunity to sell premium car wax at vintage car shows. The wax is sold in 64-ounce tubs. Marcus can buy the premium wax at a wholesale cost of $29 per tub. He plans to sell the premium wax for $84 per tub. He estimates fixed costs such as travel costs, booth rental cost, and lodging to be $880 per car show. Requirement 1. Determine the number of tubs Marcus must sell per show to break even. Begin by identifying the formula to compute the sales in units at various levels of operating income using the contribution margin approach. Units sold Sales in units Marcus must sell tubs per show to breakeven. Requirement 2a. Determine the sales volume in units necessary to earn the desired profit assuming Marcus wants to earn a profit of $1,320 per show. Marcus must sell tubs per show to earn a profit of $1,320 per show. b. Determine the sales volume in dollars necessary to earn the desired profit assuming Marcus wants to earn a profit of 1,320 per show.…arrow_forward
- Additional Activities For your final task in this module, do the activity below: Analyze the given problem. Write your answer on your notebook. Rosie sold an emerald necklace that cost P397,500 and she will get 1% commission. She sold ruby earrings that cost P106,000 and she will get 4% commission. Which piece of jewelry gives her more commission?arrow_forwardHaving recently graduated with a visual arts degree, Zane is considering starting a new business in this field, selling exotic artwork. He believes he can sell each piece of artwork for an average price of $600. The suppliers of the artwork will be paid a commission of 25% of the price. Artwork will be packed and delivered to the customer. Zane estimates that packing and delivery costs should be about $30 per product. There will be additional expenses associated with running the store. Rent will be $5,400 per month. Utilities (which it is assumed will not vary from month to month) will be $990 per month. Insurance and other expenses will be $750 per month. He plans to pay himself and one sales assistant salaries of $10,500 per month ($7,500 for himself and $3,000 for his assistant). The tax rate is assumed by Zane to be 30%. Required: a. Based on the information how many pieces of artwork per month would Zane need to sell to break even? Show all workings. b. If Zane wanted to earn a…arrow_forwardAdvanced personalized learning, tailoring instruction to a student's particular needs and learning preferences, is a challenging opportunity. One start-up with four engineers has produced an adaptive hardware/software package that is projected to sell for $4,600. Rather than pay cash, potential buyers will be able to buy the package over 3 years with end-of-month payments and interest at 11% per year compounded quarterly. Part a What is the effective monthly interest rate? Round your answer to 5 decimal places. The tolerance is ±0.00002.arrow_forward
- Show complete solution. James decides to order a homemade peach-mango pie in order to generate funds to assemble a desktop computer for his online classes. The cost of producing a whole pie is Php160, including the ingredients and other expenses. If he wants to have a 78% profit margin, how much should he price the peach-mango pie? What should be the % mark-up?arrow_forwardYou decide to earn extra money during your Engineering program by running an uber service. You purchase a car for $60,000, which you expect to sell for $18,000 at the end of the 6-year degree. You expect annual costs for insurance, maintenance and other expenses to total $7000 per year. You project to have approximately 20 customers per shift, who you will drive 8km on average. You plan on driving 80 days each year. What is the levelized cost per km of driving? MARR = 6%. The answer is within 5 cents of which of the following? Question 11 options: 1.00 1.10 1.20 1.30 None of the abovearrow_forwardSet up and solve an equation for the following business situation. You are moving to a new home and have rented a truck to assist you with the move. Trailside Truck Rentals charges $39.95 per day plus 65 cents per mile. You will need the truck for 5 days and will travel 460 miles. What will be your total cost (in dollars) for the truck rental? $ If you have budgeted $450 for the truck rental, will this amount be sufficient to cover the cost? O yes noarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
The accounting cycle; Author: Alanis Business academy;https://www.youtube.com/watch?v=XTspj8CtzPk;License: Standard YouTube License, CC-BY