Required:(i) Calculate the annual break-even point in dollars (Car Parking Revenue).(ii) Calculate the contribution margin (CM) and contribution margin ratio (CMR).(iii) Prepare a CVP graph for McCafe Inc. considering the annual base (Take 1000 units on point scale for parking-space hours as the measure of volume of activity.The annual capacityof parking area is 2.6million parking-space hours).(iv) If the company sets a target annual operating income of $300,000; what would be the annual parking revenue necessary toearn the required income?
McCafe Inc.has built a separate car parking area having parking space of 1,000 cars.$1/hour is charged for each car as parking fee whereas, the parking area operates for 2,600 hours/year. Normally, customers use the parking area as an average fortwo hours. McCafe has rented this parking area for $7,500/month from a construction company There arefive employees who look after the parking area who are paid for 50 weeks; $350/week. These employees are allowed two-week holidaysand an additional compensation of $600are paidto each employee duringthese holidays. All five employees work during the months when traffic load is high whereas, four employees handle all the matters when traffic load is lesser. The overall workload is managed byaManager who is paid $25,000/year. Maintenance and other operating costs of parking area include fixed costs of $2,500 per month whereas 7cents/parking-space/hour is included in variable cost.Required:(i) Calculate the annual break-even point in dollars (Car Parking Revenue).(ii) Calculate the contribution margin (CM) and contribution margin ratio (CMR).(iii) Prepare a CVP graph for McCafe Inc. considering the annual base (Take 1000 units on point scale for parking-space hours as the measure of volume of activity.The annual capacityof parking area is 2.6million parking-space hours).(iv) If the company sets a target annual operating income of $300,000; what would be the annual parking revenue necessary toearn the required income?
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