Required information Problem 7-45 Break-Even Analysis; Profit-Volume Graph; Movie Theaters (LO 7-1, 7-3, 7-4) Silver Screen Inc. owns and operates a nationwide chain of movie theaters. The 500 properties in the Silver Screen chain vary from low-volume, small-town, single-screen theaters to high-volume, urban, multiscreen theaters. The firm's management is considering installing popcorn machines, which would allow the theaters to sell freshly popped corn rather than prepopped corn. This new feature would be advertised to increase patronage at the company's theaters. The fresh popcorn will be sold for $1.75 per tub. The annual rental costs and the operating costs vary with the size of the popcorn machines. The machine capacities and costs are shown below. (Ignore income taxes.) Annual capacity Costs: Annual machine rental Popcorn cost per tub Other costs per tub Cost of each tub Problem 7-45 Part 3 Volume Economy 45,000 tubs tubs $ 8,000 0.13 1.22 0.08 Popper Model Regular 90,000 tubs $ 11,000 0.13 1.14 0.08 Super 140,000 tubs 3. Calculate the volume (in tubs) at which the Economy Popper and the Regular Popper earn the same profit or loss in each movie theater. (Do not round intermediate calculations.) $ 20,000 0.13 1.05 0.08

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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Question

3. Calculate the volume (in tubs) at which the Economy Popper and the Regular Popper earn the same profit or loss in each movie theater.

Required information
Problem 7-45 Break-Even Analysis; Profit-Volume Graph; Movie Theaters (LO 7-1, 7-3, 7-4)
Silver Screen Inc. owns and operates a nationwide chain of movie theaters. The 500 properties in the Silver Screen chain
vary from low-volume, small-town, single-screen theaters to high-volume, urban, multiscreen theaters. The firm's
management is considering installing popcorn machines, which would allow the theaters to sell freshly popped corn rather
than prepopped corn. This new feature would be advertised to increase patronage at the company's theaters. The fresh
popcorn will be sold for $1.75 per tub. The annual rental costs and the operating costs vary with the size of the popcorn
machines. The machine capacities and costs are shown below. (Ignore income taxes.)
Annual capacity
Costs:
Annual machine rental
Popcorn cost per tub
Other costs per tub
Cost of each tub
Problem 7-45 Part 3
Volume
Economy
45,000 tubs
tubs
$ 8,000
0.13
1.22
0.08
Popper Model
Regular
90,000 tubs
$ 11,000
0.13
1.14
0.08
Super
140,000 tubs
3. Calculate the volume (in tubs) at which the Economy Popper and the Regular Popper earn the same profit or loss in each movie
theater. (Do not round intermediate calculations.)
$ 20,000
0.13
1.05
0.08

Expert Solution

Step 1 Introduction

Variable Cost :— It is the cost that changes with change in activity of cost driver. Variable cost per cost driver is constant for all flexible activity of cost driver within relevant range.

Fixed Cost :— It is the cost that does not changes with change in activity of cost driver. Total fixed cost is constant for all flexible activity of cost driver within relevant range.