2) All That Blooms performs environmentally friendly lawn services for homeowner

Question

2) All That Blooms performs environmentally friendly lawn services for homeowners. Its operating cost are as follows. Depreciation Advertising Insurance Weed and feed materials Direct labor Fuel $1,400 per month $200 per month $2,000 per month $12 per lawn $10 per lawn $2 per lawn All That Blooms charges $60 per treatment for the average single-family lawn Instruction: Determine the company's break-even point in: (a) number of lawns serviced per month (b) dollars 3) Kare Ka international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below. rs provides shuttle service between four hotels near a medical center and an Fare revenues (1,440 fares) Variable costs $36,000 Fuel Tolls and parking Maintenance $5,040 $3,100 $860$9.000 Contribution margin Fixed cost $27,000 Salaries Depreciation Insurance $12,700 $1,300 $1000 $15,000 Net income $12,000 Instruction (a) Calculate the break-even point in: (1) Dollar's 2) Number of fares (b) Determine the contribution margin at the break-even point

Explanation / Answer

Solution 2:

Price per treatment for lawn = $60

Variable cost per lawn = $12 + $10 + $2 = $24

Contribution per lawn serviced = $60 - $24 = $36

Fixed Cost per month = $1,400 + $200 + $2,000 = $3,600

Breakeven point = Fixed Cost / Contribution per lawn = $3,600 / $36 = 100 lawns to be serviced per month

Breakeven point (in dollars) = 100*60 = $6,000

Solution 3:

Price per fare = $36,000/1,440 = $25

Variable cost per fare = $9,000/1,440 = $6.25

Contribution per fare = $25 - $6.25 = $18.75

Fixed Cost per month = $15,000

Breakeven point = Fixed Cost / Contribution per fare = $15,000 / $18.75 = 800 fares per month

Breakeven point (in dollars) = 800*25 = $20,000

Contribution margin at breakeven point is always equal to fixed cost = $15,000

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