Hello, I need help solving this accounting problem. Required:Perform a sensitivity analysis by answering the following questions:a. What is the break-even point in sales dollars for RBC?b. What is the margin of safety for RBC?c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?Complete this question by entering your answers in the tabs below.Required ARequired BRequired CWhat is the break-even point in sales dollars for RBC? (Round intermediate calculations to 3 decimal places and your finalanswer to the nearest whole dollar.)Break-even point< Required ARequired B > Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC).Brewpubs provide two products to customers-food from the restaurant segment and freshly brewed beer from the beer productionsegment. Both segments are typically in the same building, which allows customers to see the beer-brewing process.After months of research, the owners created a financial model that showed the following projections for the first year of operations.Sales$ 763,2001,017,600339,200$2,120,000Вeer salesFood salesother salesTotal sales494,384$1,625,616Less cost of salesGross marginLess marketing and administrative expenses1,214,000$ 411,616Operating profitIn the process of pursuing capital through private investors and financial institutions, RBC was approached with several questions. Thefollowing represents a sample of the more common questions asked:• What is the break-even point?• What sales dollars will be required to make $110,000? To make $470,000?• Is the product mix reasonable? (Beer tends to have a higher contribution margin ratio than food, and therefore product mixassumptions are critical to profit projections.)• What happens to operating profit if the product mix shifts?• How will changes in price affect operating profit?• How much does a pint of beer cost to produce?It became clear to the owners of RBC that the initial financial model was not adequate for answering these types of questions. Afterfurther research, RBC created another financial model that provided the following information for the first year of operations.SalesBeer sales (368 of total sales)Food sales (48 of total sales)Other sales (16 of total sales)$ 763,2001,017,600339,200Total sales$2,120,000Variable CostsBeer (118 of beer sales)Food (308 of food sales)Other (318 of other sales)Wages of employees (248 of sales)Supplies (3% of sales)Utilities (5 of sales)Other: credit card, misc. (38 of sales)Total variable costsContribution margin83,952305, 280105,152508,80063,600106,00063,600$1,236,384883,616Fixed CostsSalaries: manager, chef, brewerMaintenance136,00024,00016,000Advertisingother: cleaning, menus, miscInsurance and accountingProperty taxesDepreciationDebt service (interest on debt)34,00030,00015,00085,000132,000Total fixed costs$ 472,000Operating profit411,616

This numerical has covered the concept of Cost Volume Profit Analysis.The solution to required (a):- Here, Total Fixed Cost = $472,000 Contribution Margin Ratio = (Contribution Margin / Total Sales ) *100 = (883,616 / 2,120,000) * 100 = 41.68 % Break-Even Point of Sales in dollars = (Total Fixed Cost Of the RBC / Contribution Margin Ratio) = ($472,000 / 41.68%) = $1,132,438 The solution to required (b):- Margin Of Safety = (Total Sales of the RBC - Break- Even Sales Of RBC) = (2,120,000 - 1,132,438) = $987,562 The solution to required (c):- Sales in dollars = (Total Fixed Cost Of RBC +Targeted Operating Profit of RBC) / Contribution Margin Ratio Case 1:- Sales ($) required to achieve Net operating income of $110,000 Total Fixed Cost Of RBC = $472,000 Targeted Operating Profit of RBC = $110,000 Contribution Margin Ratio = 41.68 % (Calculated in requirement a) Sales in Dollars = $(472,000 + 110,000) / 41.68 % = $1,396,353 Case 1:- Sales ($) required to achieve Net operating income of $470,000 Total Fixed Cost Of RBC = $472,000 Targeted Operating Profit of RBC = $470,000 Contribution Margin Ratio = 41.68 % (Calculated in requirement a) Sales in Dollars = $(472,000 + 470,000) / 41.68 % = $2,260,077

Business

Accounting

Required: Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b. What is the margin of safety for RBC? c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?

Required: Perform a sensitivity analysis by answering the following questions: a. What is the break-even point in sales dollars for RBC? b. What is the margin of safety for RBC? c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Hello, I need help solving this accounting problem.

Required:
Perform a sensitivity analysis by answering the following questions:
a. What is the break-even point in sales dollars for RBC?
b. What is the margin of safety for RBC?
c. What sales dollars would be required to achieve an operating profit of $110,000? $470,000?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
What is the break-even point in sales dollars for RBC? (Round intermediate calculations to 3 decimal places and your final
answer to the nearest whole dollar.)
Break-even point
< Required A
Required B >

Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC).
Brewpubs provide two products to customers-food from the restaurant segment and freshly brewed beer from the beer production
segment. Both segments are typically in the same building, which allows customers to see the beer-brewing process.
After months of research, the owners created a financial model that showed the following projections for the first year of operations.
Sales
$ 763,200
1,017,600
339,200
$2,120,000
Вeer sales
Food sales
other sales
Total sales
494,384
$1,625,616
Less cost of sales
Gross margin
Less marketing and administrative expenses
1,214,000
$ 411,616
Operating profit
In the process of pursuing capital through private investors and financial institutions, RBC was approached with several questions. The
following represents a sample of the more common questions asked:
• What is the break-even point?
• What sales dollars will be required to make $110,000? To make $470,000?
• Is the product mix reasonable? (Beer tends to have a higher contribution margin ratio than food, and therefore product mix
assumptions are critical to profit projections.)
• What happens to operating profit if the product mix shifts?
• How will changes in price affect operating profit?
• How much does a pint of beer cost to produce?
It became clear to the owners of RBC that the initial financial model was not adequate for answering these types of questions. After
further research, RBC created another financial model that provided the following information for the first year of operations.
Sales
Beer sales (368 of total sales)
Food sales (48 of total sales)
Other sales (16 of total sales)
$ 763,200
1,017,600
339,200
Total sales
$2,120,000
Variable Costs
Beer (118 of beer sales)
Food (308 of food sales)
Other (318 of other sales)
Wages of employees (248 of sales)
Supplies (3% of sales)
Utilities (5 of sales)
Other: credit card, misc. (38 of sales)
Total variable costs
Contribution margin
83,952
305, 280
105,152
508,800
63,600
106,000
63,600
$1,236,384
883,616
Fixed Costs
Salaries: manager, chef, brewer
Maintenance
136,000
24,000
16,000
Advertising
other: cleaning, menus, misc
Insurance and accounting
Property taxes
Depreciation
Debt service (interest on debt)
34,000
30,000
15,000
85,000
132,000
Total fixed costs
$ 472,000
Operating profit
411,616

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