now cleaning the plant and will spend nothing for cleaning sup- plics. Will Napo

Question

now cleaning the plant and will spend nothing for cleaning sup- plics. Will Napoo save moncy with the outside cleaning company over the next quarter? Prepare a schedule that supports your answer. 2-A2 Cost-Volume-Profit and Vending Machines Vendmart Food Services in restau- facturer. In addition, Vendmart must rent the space occupied by its The cxpcnso ps pertain to a contemplated expansion program of 80 machines. and revenUc Fixed monthly expenses follow: 80 machines $22.10 $1,768 1,600 Space rental: 80 locations $20.00 Part-time wages to service the additional 80 machines Other fixcd costs Total monthly fixed costs 132 $4,000 Other data follow Per $100 of Sales 100% Per Unit (Snack) Selling price Cost of snack $1.00 68 Contribution margin32 ise 1. What is the monthly break -even point in number of units (snacks)? la dollar salen? 2. IE 45,000 units were sold, what would be the company's net i 3. If the space rental cost was doubled, what would be the monthly break-even point in number of ncome? units? In dollar sales? 4. Refer to the original data If in addit paid the vending machine even point in n munufucturer $.07 per unit sold, what would be the monthly breuk- f units? In dollar sales! turer S11 for each unit sold

Explanation / Answer

1. Break even point= Fixed cost/ contribution margin per unit

Fixed cost= $4000 and Contribution margin= 32%

Break even in units= 4000/32%= 12,500 units

in dollars= 12500*$1= $12,500

2. if the sales are for 45,000 units, then the netincome will be

= 45,000*$0.32= $14,400

3. if the space rental is doubled, then it becomes $3200 (earlier it is $1600) and the total cost will become as $5600

Now the BEP units are= 5600/0.32= 17,500 units

BEP in dollars= 17,500*$1= $17,500

4. if they paid $0.07 per each snack, then the variable cost becomes $0.75 per unit. the contribution margin ratio becomes 25%.

Now the new BEP will be= 4000/25%= 16,000 units

in dollars= 16,000*$1= $16,000

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