QUESTION 3 [13 MARKS] You are the manager of anewly established coffee shop in Gaborone calledGabz Coffee Mart.The shop sells specialty coffeedrinks, pastries, and sandwiches. It has fixed costs (rent, salaries, utilities) of 24,000 per month. Thevariable cost per coffee drink (including coffeebeans, milk, and cups) is P8 and the selling price percoffee drink is P16. Requireda) Explain theimportance of break-even analysis for Gabz CoffeeMarts decision-making process. (3 marks)b)Calculate the number of coffee drinks Gabz CoffeeMart needs to sell to reach the break-evenpoint. (3marks)c) How many units of coffee should the shopsell to realize a profit of P8,000.00? (3 marks)d)Calculate the new breakeven quantity if fixed costsincreased to P30,000 while selling priceincreased by25% and variable cost increased by 50% (4 marks)

Break-even analysis is a pivotal tool in the decision-making arsenal of any business, particularly…

Answered: QUESTION 3 [13 MARKS] You are the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 5-4 (Algo) Break-Even Analysis [LO5-4] Mauro Products sells a woven basket for $14 per unit. Its variable expense is $10 per unit and the company's monthly fixed expense is $4,000. Required: 1. Calculate the company's break-even point in unit sales. 2. Calculate the company's break-even point in dollar sales. Note: Do not round intermediate calculations. 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? Note: Do not round intermediate calculations. 1. Break-even point in unit sales 2. Break-even point in dollar sales 3. Break-even point in unit sales 3. Break-even point in dollar sales baskets baskets
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Problem 5-20 (Algo) Evaluating the Profitability of Services [LO5-2, LO5-3, LO5-4, LO5-5] Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.85 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers-particularly those located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Cleaning carpets Travel to jobs Job support Other (organization-sustaining costs and idle capacity costs) Activity Measure Square feet cleaned (005) Miles…
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Question 7 (Breakeven Analysis). You decided to sell Only coffee using Nespresso machine during Ramadan The Nespresso Machine Cost is 3,000 SAR Every cup of coffee required one brown sugar that cost 0.5 SAR, one disposable cup costs 1.5 SAR, and one coffee capsule costs 3 SAR If you sell one coffee for 10 SAR Option 2 Option 1 No Employee Sales quantity = 1500 per month Selling Price 10 SAR per coffee One more Employee and his salary is 4000 Expected sales quantity = 2500 per month Selling Price 10 SAR per coffee What is the breakeven quantity? What is the breakeven quantity? What is the profit? What is the profit? Which option is better?
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EC 3 Question 3 Hometown Bakery sells three types of doughnuts: glazed, jelly, and cake. The following table shows the sales price and variable costs for each type. The bakery incurs $331,000 a year in fixed expenses. Assume that it sells 3 glazed doughnuts for every 1 jelly doughnut and every 1 cake doughnut. DOUGHNUT TYPE SALES PRICE VARIABLE COST Glazed $0.40 $0.29 Jelly $0.52 $0.49 Cake $0.47 $0.29 (a) How many doughnuts of each type will be sold at the breakeven point? (Round intermediate calculations and final answers for the number of doughnuts to the nearest whole, e.g. 5,275.) Jelly doughnuts Cake doughnuts Glazed doughnuts b. What amount of revenue would need to be generated by each type of doughnut for the company to earn $74,100 in operating income?
H5. Account
ces Exercise 2-17 (Algo) Break-Even and Target Profit Analysis [LO2-4, LO2-5, LO2-6] Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $120 per unit. Variable expenses are $84 per stove, and fixed expenses associated with the stove total $162,000 per month. Required: 1. What is the break-even point in unit sales and in dollar sales? 2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.) 3. At present, the company is selling 15,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. 4. Refer to the data in Required 3. How many stoves would have…
Problem 8-44 (Algo) Cost Estimation; High-Low Method [LO 8-3] Horizon BP in Antelope Park, Alaska, has noticed that utility bills are substantially higher when the average monthly temperature is colder. The only thing in the shop that uses natural gas is the furnace. Because of prevailing low temperatures, the furnace is used every month of the year (though less in the summer months and very little in August). Everything else in the shop runs on electricity, and electricity use is fairly constant throughout the year. For a year, Horizon has been recording the average daily temperature and the cost of its monthly utility bills for natural gas and electricity. Required: Use the high-low method to estimate utility cost for the upcoming months of January and February. The forecast for January is a near record average temperature of 5°F; temperatures in February are expected to average 40°F.

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