Gulf Shore Lawn and Garden Maintenance provides two general outdoor services: la
ID: 2492051 • Letter: G
Question
Gulf Shore Lawn and Garden Maintenance provides two general outdoor services: lawn maintenance and garden maintenance. The company charges customers $15 per hour for each type of service, but lawn maintenance has higher variable costs ($3.00 per hour) than garden maintenance ($6.00 per hour) because of fuel expenses incurred to operate lawn-mowing equipment. All employees are paid a fixed monthly salary. A contribution format income statement for a recent month for the two services appears below. During the month, 3,500 hours of lawn maintenance services and 875 hours of garden maintenance were provided: Lawn Maintenance Per Hour Garden Maintenance Per Hour Total Sales $ 52,500 $ 15.00 $ 13,125 $ 15.00 $ 65,625 Variable expenses 10,500 3.00 5,250 6.00 15,750 Contribution margin $ 42,000 $ 12.00 $ 7,875 $ 9.00 49,875 Fixed expenses 47,880 Operating income $ 1,995
Required: 1. Compute the overall CM ratio for the company.
Compute the overall break-even point for the company in sales dollars.
calculate the weighted average cm per hourfor the company)do notround intermediate calculation.Round your answers to 2 decimal places
Calculate the overall break-even point for the company in hours.
At the overall break-even point in total hours, how many hours of each service must be provided for the company to break-even?
Calculate the overall sales in dollars required to earn an after-tax profit of $79,800 if the tax rate is 30%.
4.Calculate the overall break-even point for the company in hours.
5.
At the overall break-even point in total hours, how many hours of each service must be provided for the company to break-even?
6.
Calculate the overall sales in dollars required to earn an after-tax profit of $79,800 if the tax rate is 30%.
Explanation / Answer
Lawn maintenance Garden Maitenance 3500 hours 875 Hours Total Per Hour Total Per Hour Total Total Sales 52500 15 13125 15 65625 Variable expenses 10500 3 5250 6 15750 Contribution margin 42000 12 7875 9 49875 Fixed expenses 47880 Operating income 1995 Contribution margin (CM) ratio = Contribution Margin/Sales = 49875/65625 = 76% Overall Breakeven point in sales dollar = Fixed Cost/Contribution mArgin ratio = 47880/76% = $ 63,000 Weighted average cm per hour = 49875/(3500+875) = $ 11.40
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