Boone Template

xlsx

School

Brandeis University *

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Course

251F

Subject

Accounting

Date

Apr 3, 2024

Type

xlsx

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Uploaded by PresidentFieldGuanaco37

Income Statement Gross Margin Format Revenue $ 1,572,000 Less Expenses Variable Cost: Compensation to Guides* Compensation to Guides* 707,400 V Meals for rafters Meals for rafters 471,600 V T-shirts & hats for rafters Depreciation of equipment 312,900 F Advertising expense** 75,000 F Fixed Cost: Advertising expense** T-shirts & hats for rafters 47,160 V Depreciation of equipment Salary of Office manager 24,750 F Salary of Office manager Insurance premium 5,775 F Insurance premium Total Operating Expenses 1,644,585 Net Income $ (72,585) *Compensation is dependent on number of trips ** Monthly flat fee Unit = # of rafters 1) Identify the fixed and variable costs relative to the number of rafters. 2) Reconstruct the income statement using the contribution margin approach. 3) How many rafters are required for Ms. Boone to earn a $75,000 profit? 4) Ms. Boone was told to expect a 10% increase in fixed costs for the next year. In addition, she should plan for a 5) What do you suggest that Ms. Boone do to increase profitability? Judy Boone just fulfilled a dream as she completed her first year as the owner of a rafting company. Unfortunately, her operation was not profitable. She has enough savings to get her through another year or two, but she realizes that she will have to start making a profit or give up her dream. Her company’s income statement for the first year of operation follows. Ms. Boone schedules two-week rafting trips in groups of 8 rafters. The fee for a trip includes rental of equipment, a guide, meals, T-shirts and hats. For 2015, Boone Rafting Company led 131 groups of 8 rafters each.

20% increase in variable costs. Based on these increases, how many rafters must Ms. Boone serve to earn the $75

5,000 desired profit if the price per rafter remains the same?

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Income Statement Gross Margin Format Revenue $ 1,572,000 Less Expenses Compensation to Guides 707,400 Meals for rafters 471,600 Depreciation of equipment 312,900 Advertising expense 75,000 T-shirts & hats for rafters 47,160 Salary of Office manager 24,750 Insurance premium 5,775 Total Operating Expenses 1,644,585 Net Income $ (72,585) Trips 131 Number of rafters per trip 8 Number of rafters 1048 Breakeven => Fixed Total Fixed Costs Sales price per rafter $ 1,500 Breakeven Variable cost per rafter $ 1,170 CM per unit $ 330 One rafter covered $330 of variable cost Desired Profit => Fix Total Fixed Costs Desired Profit Target Profit Desired Profit with price increases Total Fixed Costs Desired Profit 75,000 New Variable Cost New Contribution Margin Target Profit Judy Boone just fulfilled a dream as she completed her first year as the owner of a rafting company. Unfortuna savings to get her through another year or two, but she realizes that she will have to start making a profit or gi first year of operation follows.

Income Statement Contribution Margin Format Revenue $ 1,572,000 Compensation to Guides 707,400 Meals for rafters 471,600 T-shirts & hats for rafters 47,160 1,226,160 Total Variable Contribution Margin $ 345,840 $ 415,008.0 Fixed Costs Depreciation of equipment 312,900 Advertising expense 75,000 Salary of Office manager 24,750 Insurance premium 5,775 Total Fixed Costs 418,425 460,267.50 10% of increase Fixed cost Net Income $ (72,585) d Costs / Contribution Margin per unit 418,425 1,267.95 1,267 rafters need to cover Fixe 158.5 159trips xed Costs + Profit / Contribution Margin per unit 418,425 75,000 493,425.00 1,495.23 1,496 rafters need 186.90 187trips ately, her operation was not profitable. She has enough ive up her dream. Her company’s income statement for the