Biscayne\'s Rent-A-Ride rents two models of automobiles: the standard and the de
ID: 2555454 • Letter: B
Question
Biscayne's Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: Standard Deluxe price per $64.00 $72.00 day Variable cost per 27.50 32.20 day Biscayne's total fixed cost is $27,000.00 per month. Required: 1. Determine Biscayne's new break-even point in each of the following independent scenarios: a. Product mix is 40/60. (Do not round your intermediate calculations. Round your answer to the nearest whole number.) Rental b. Sales price increases on both models by 15 percent. (Assume a product mix of 50150.) (Do not round your intermediatecalculations. Round your answer to the nearest whole number.) Rental Days c. Fixed costs increase by $5,600. (Assume a product mix of 50150.) (Do not round your intermediate calculations. Round your answer to the nearest whole number.) Rental Days d. Variable costs increase by 20 percent. (Assume a product mix of 5050.) (Do not round your intermediate calculations. Round your answer to the nearest whole number.) Rental DaysExplanation / Answer
1)(a)Calculation of contribution margin per rental day: Contribution margin = selling price- variable cost per unit Standard Unit contribution margin=64-27.5=$36.5 Deluxe Unit contribution margin=72-32.20=$39.80 Calculation of break even point: Break even point= fixed cost/ contribution per rental day Contribution per rental day=36.5*0.5+39.8*0.5=$38.15 Break even point=27000/38.15=708 rental days (b)Calculation of contribution margin per rental day: Contribution margin = selling price- variable cost per unit Standard Unit contribution margin=(64*1.15)-27.5=$46.10 Deluxe Unit contribution margin=(72*1.15)-32.20=$50.6 Calculation of break even point: Break even point= fixed cost/ contribution per rental day Contribution per rental day=46.1*0.5+50.6*0.5=$48.35 Break even point=27000/48.35=558 rental days (c)Calculation of break even point: Break even point= fixed cost/ contribution per rental day Break even point=(27000+5600)/38.15=855 rental days (d)Calculation of contribution margin per rental day: Contribution margin = selling price- variable cost per unit Standard Unit contribution margin=64-(27.5*1.2)=$31 Deluxe Unit contribution margin=72-(32.20*1.2)=$33.36 Calculation of break even point: Break even point= fixed cost/ contribution per rental day Contribution per rental day=31*0.5+33.36*0.5=$32.18 Break even point=27000/32.18=839 rental days
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