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Finance

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Nov 24, 2024

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10/30/23, 8:15 PM Chapter 4 Post-Class Homework https://www.ameengage.com/mod/quiz/review.php?attempt=4637934&cmid=1260603&page=13 1/2 Dashboard / My courses / [Seneca 09/2023] HTM440NHB - Nardi / CHAPTER 4 - Cost-Volume-Profit Analysis / Chapter 4 Post-Class Homework Question 14 Partially correct Mark 7.00 out of 8.00 Take me to the text Happiness Company wants to open a new spa in a nearby plaza. Happiness Company will be offering half-day spa treatments for $200 each. Variable costs (not including the leasing costs below) are $54 for every treatment. In terms of lease payments, the plaza has provided him three options: i. Pay $28 per treatment given ii. $23,000 per month iii. $12,000 per month and $7 per treatment given Do not enter dollar signs or commas in the input boxes. Use the negative sign for negative values. Round all answers to the nearest whole number. a) Calculate the monthly operating profit for each of the three options if 310 treatments are given and if 610 treatments are given. Lease Option Operating Profit Based on the Number of Treatments Given 310 units 610 units i. Pay $28 per treatment given $ 36580 $ 72980 ii. $23,000 per month $ 22260 $ 66060 iii. $12,000 per month and $7 per treatment given $ 31090 $ 72790 b) At a level of 610 massages, which option should be recommended? Option: c) Calculate the degree of operating leverage for the second lease option if Happiness Company gives 610 treatments. Round your answer to 2 decimal places. Degree of Operating Leverage: 1.35 iii Explanation a) Operating Income = Sales Revenue - Variable Costs - Fixed Costs Lease Option Operating Profit Based on the Number of Treatments Given 310 units 610 units i. Pay $28 per treatment given $36,580 71,980 ii. $23,000 per month $22,260 66,060 iii. $12,000 per month and $7 per treatment given $31,090 72,790 b) Option iii has the greatest operating income. c) Degree of Operating Leverage = Contribution Margin ÷ Operating Income Degree of Operating Leverage: 1.35 Partially correct Marks for this submission: 7.00/8.00.
10/30/23, 8:15 PM Chapter 4 Post-Class Homework https://www.ameengage.com/mod/quiz/review.php?attempt=4637934&cmid=1260603&page=13 2/2
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