Biscayne\'s Rent-A-Ride rents two models of automobiles: the standard and the de

Question

Biscayne's Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: 46.00 $54.00 840 24.30 Biscayne's total fixed cost is $14,525 per month. 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.) Day Day Contribution Mangin Ratio 2. Which model would Biscayne's prefer to rent? Deluxe Model Standard Mode 3. Calculate Biscayne's break-even point if the product mix is 50/50. (Do not round intermediate calculations. Round your whole number.) final answer to the nearest Rental Days 4. Calculate the break-even point if Biscayne's product mix changes so that the standard model is rented 75 percent of the time and the deluxe model is rented for only 25 percent. (Do not round intermediate calculations. Round your final answerto the nearest whole number.) Renital Days 5. Calculate the break-even point if Biscayne's product mix changes so that the standard model is rented 25 percent of the time and the deluxe model is rented for 75 percent. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Rental Days

Explanation / Answer

Answer 1.

Standard:

Contribution Margin per day = Rental Price per day - Variable Cost per day
Contribution Margin per day = $46.00 - $18.40
Contribution Margin per day = $27.60

Contribution Margin Ratio = Contribution Margin per day / Rental Price per day
Contribution Margin Ratio = $27.60 / $46.00
Contribution Margin Ratio = 60%

Deluxe:

Contribution Margin per day = Rental Price per day - Variable Cost per day
Contribution Margin per day = $54.00 - $24.30
Contribution Margin per day = $29.70

Contribution Margin Ratio = Contribution Margin per day / Rental Price per day
Contribution Margin Ratio = $29.70 / $54.00
Contribution Margin Ratio = 55%

Answer 2.

Biscayne should prefer Standard Model as its Contribution Margin Ratio is highest.

Answer 3.

Sales Mix = 0.50 : 0.50

Overall Contribution Margin per day = 0.50 * $27.60 + 0.50 * $29.70
Overall Contribution Margin per day = $28.65

Breakeven Point = Fixed Costs / Overall Contribution Margin per day
Breakeven Point = $14,525 / $28.65
Breakeven Point = 507 rental days

Answer 4.

Sales Mix = 0.75 : 0.25

Overall Contribution Margin per day = 0.75 * $27.60 + 0.25 * $29.70
Overall Contribution Margin per day = $28.125

Breakeven Point = Fixed Costs / Overall Contribution Margin per day
Breakeven Point = $14,525 / $28.125
Breakeven Point = 516 rental days

Answer 5.

Sales Mix = 0.25 : 0.75

Overall Contribution Margin per day = 0.25 * $27.60 + 0.75 * $29.70
Overall Contribution Margin per day = $29.175

Breakeven Point = Fixed Costs / Overall Contribution Margin per day
Breakeven Point = $14,525 / $29.175
Breakeven Point = 498 rental days

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.