Insert Page Layout FormulasData Review View Arial 10 A A Paste A33 24 No revenue
ID: 2822000 • Letter: I
Question
Insert Page Layout FormulasData Review View Arial 10 A A Paste A33 24 No revenue does not increase with price because the demand is going down 25 26 27 28 PROBLEM 2 (3 pts) 29 George plans to open a restaurant in Bimingham. The menu calls for the average customer to spend $15 on each meal. Total fixed costs are $20,000 per month. The total variable costs per 30 meal are expected to average $6. 31 32 a. How many meals does George need to sell in a year to breakeven? 34 35 36 b. How many meals does George need to sell in a year to eam a $100,000 net margin? 37 38 39 40 C. How many meals does George need to sel n a year to earn a net margin equal to 10% of sales 41 revenue? 42 43 5 PROBLEM 3 (4 pts) 46 Courtney is a manufacturers representative for an industry leading supplier of technology products. She has determined that last year her largest customer, Abbacus, purchased 10,000 cases of 47 product from her at a price of SE per case. The gross margin on those sales was 40%. Abbacus has pressed Courtney hard for a 5% discount (reduction in selling price) throughout the next year. Courtney has spoken with her manager and leamed that she will be expected to 48 generate 5% more in gross margin next year than she did last year. 49 50 a. How much Sales Revenue and Gross Margin did Courtney generate from Abbacus last year? 51 52 b. If Courtney grants a 5% decExplanation / Answer
Problem 2
Selling price per meal = $15
Variable cost per meal = $6
Fixed cost per month = $20,000
Hence, annualfixed cost = 20,000 x 12
= $240,000
Contribution margin = Selling price per meal - Variable cost per meal
= 15 - 6
= $9
(a)
Number of units to be sold to break even = Fixed cost/Contribution margin
= 240,000/9
= 26,667 meals
(b)
Number of units to be sold to get a desired income = (Fixed cost + Desired income)/Contribution margin
= (240,000 + 100,000)/9
= 340,000/9
= 37,778 meals
(c)
Let the number of units to be sold = X
Sales = 15X
Net income = 15X x 10%
= 1.5X
Variable cost = 9X
Net income = Sales - Variable cost - Fixed cost
1.5X = 15X - 9X - 240,000
4.5X = 240,000
X = 240,000/4.5
= 53,334 meals
Hence, 53,334 meals must be sold to get an income of 10% on sales.
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