Ch 6 Homework Instructions I help Question 3 (of 8) Save & Cxi SLbmit 0.50 point
ID: 2330154 • Letter: C
Question
Ch 6 Homework Instructions I help Question 3 (of 8) Save & Cxi SLbmit 0.50 points Biscayne's Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: Slandard Deluxe $60.00 S68.00 Rental price per day Variable cost per day Biscayne's total fixed cost is $20,454 per mornth. Required: 1. Determine the contribution margin per rental day and contribution margin ratio for each model that Biscayne's offers. (Round your "Unit Contribution Margin" answers to 2 decimal places.) Standard Deluxe Unit Contribution Margin Contribulion Margiri Ralio per Day per Day 2. Which model would Biscayne's prefer to rent? O Deluxe Model Standard Model 3. Calculate Biscayne's break-even point if the product mix is 50 50. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) reak Rental Days 4. Calculate the break-even polnt if Biscayne's product mix changes so that the stancdard model is rentecl 75 percent of the time and the deluxe model Is rented for only 25 percent. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) reak-Even Rental Days 5. Calculale the break-ever poir Biscayne's produtmx ceges so thal the sadard moel isentecd 25 pervent of the tie arid the deluxe rmodel is rented for 75 percenL (Do not round Intermediate calculations. Round your final answer to the nearest whole number.) Rental DaysExplanation / Answer
(1)
(2)
Since contribution margin ratio of Standard model is higher than contribution margin ratio of Deluxe model, hence Biscayne would prefer Standard model.
(3)
Fixed cost per month = $20,454
Product mix is 50/50
Hence, weighted Contribution margin per day = 36 x 0.5 + 37.40 x 0.5
= 18 + 18.70
= $36.70
Break even point = Fixed cost/Weighted contribution margin per day
= 20,454/36.70
= 558 rental days
(4)
Fixed cost per month = $20,454
Product mix is 75/25
Hence, weighted Contribution margin per day = 36 x 0.75 + 37.40 x 0.25
= 27 + 9.35
= $36.35
Break even point = Fixed cost/Weighted contribution margin per day
= 20,454/36.35
= 563 rental days
Standard Deluxe Rental price per day (i) $60 $68 Variable cost per day (ii) $24 $30.60 Unit contribution margin(iii) = (i) - (ii) $36 per day $37.40 per day Contribution margin ratio (iii)/(i) 60% 55%