Exercise 4-7 Break-Even Analysis [LO5]; Margin of Safety [LO7] 1 James House is planning on starting a cleaning services business but has not decided whether he should focus on residential clients or commercial clients. His estimates of revenue, variable expenses, and fixed expenses are shown below. Revenue Variable expense Fixed expense Residential $ 120 per hour $ 72 per hour $15,600 per month Required: 1. Calculate the number of break-even hours for residential clients and commercial clients. (Round your answers to 1 decimal place.) Break-even hours for residential clients Break-even hours for commercial clients Commercial 130 per hour $ $ 65 per hour $17,810 per month. Margin of safety (in dollars) Margin of safety as a percentage of sales hours hours 2. Assume that James decides to focus on commercial clients and his business is operating at 365 hours per month. Calculate the margin of safety both in dollars and as a percentage of sales. (Round percentage answer to 1 decimal place.) %
Exercise 4-7 Break-Even Analysis [LO5]; Margin of Safety [LO7] 1 James House is planning on starting a cleaning services business but has not decided whether he should focus on residential clients or commercial clients. His estimates of revenue, variable expenses, and fixed expenses are shown below. Revenue Variable expense Fixed expense Residential $ 120 per hour $ 72 per hour $15,600 per month Required: 1. Calculate the number of break-even hours for residential clients and commercial clients. (Round your answers to 1 decimal place.) Break-even hours for residential clients Break-even hours for commercial clients Commercial 130 per hour $ $ 65 per hour $17,810 per month. Margin of safety (in dollars) Margin of safety as a percentage of sales hours hours 2. Assume that James decides to focus on commercial clients and his business is operating at 365 hours per month. Calculate the margin of safety both in dollars and as a percentage of sales. (Round percentage answer to 1 decimal place.) %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 4-7 Break-Even Analysis [LO5]; Margin of Safety [LO7]
1
James House is planning on starting a cleaning services business but has not decided whether he should focus on residential clients
or commercial clients. His estimates of revenue, variable expenses, and fixed expenses are shown below.
Revenue
Variable expense
Fixed expense
Residential
$ 120 per hour
$ 72 per hour
$15,600 per month
Required:
1. Calculate the number of break-even hours for residential clients and commercial clients. (Round your answers to 1 decimal place.)
Break-even hours for residential clients
Break-even hours for commercial clients
Commercial
$ 130 per hour
$
65 per hour
$17,810 per month
Margin of safety (in dollars)
Margin of safety as a percentage of sales
hours
hours
2. Assume that James decides to focus on commercial clients and his business is operating at 365 hours per month. Calculate the
margin of safety both in dollars and as a percentage of sales. (Round percentage answer to 1 decimal place.)
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fff75db39-6bdc-47f9-9a70-884f2ed536ea%2F548db718-095f-4f71-b4e8-0bbe0d129244%2Ff3okeq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 4-7 Break-Even Analysis [LO5]; Margin of Safety [LO7]
1
James House is planning on starting a cleaning services business but has not decided whether he should focus on residential clients
or commercial clients. His estimates of revenue, variable expenses, and fixed expenses are shown below.
Revenue
Variable expense
Fixed expense
Residential
$ 120 per hour
$ 72 per hour
$15,600 per month
Required:
1. Calculate the number of break-even hours for residential clients and commercial clients. (Round your answers to 1 decimal place.)
Break-even hours for residential clients
Break-even hours for commercial clients
Commercial
$ 130 per hour
$
65 per hour
$17,810 per month
Margin of safety (in dollars)
Margin of safety as a percentage of sales
hours
hours
2. Assume that James decides to focus on commercial clients and his business is operating at 365 hours per month. Calculate the
margin of safety both in dollars and as a percentage of sales. (Round percentage answer to 1 decimal place.)
%
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