The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cupm of coffee to full meals. The average sales check per customer is $8.75. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 36%. Target net income is $117,600 Requirements 1. Compute the revenues needed to earn the target net income. 2. How many customers are needed to break even? To earn net income of $117,600? 3. Compute net income if the number of customers is 170,000. Requirement 1. Compute the revenues needed to eam the target net income. Using the equation method, select the basic formula used to compute the revenues needed to eam the target net income. Target net income 1-Tax rate Revenues Variable costs Fixed costs 1,023,750 The revenues needed to earn the target net income is $ Requirement 2. How many customers are needed to break even? To earn net income of $117.600? Determine the formula that is used to compute how many customers are needed to break even, then compute the number of customers needed. Customers needed to break even Choose from any drop-down list
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
The Home Style Eats has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $430,500 per year. Service varies from a cupm of coffee to full meals. The average sales check per customer is $8.75. The average cost of food and other variable costs for each customer is $3.50. The income tax rate is 36%. Target net income is $117,600 Requirements 1. Compute the revenues needed to earn the target net income. 2. How many customers are needed to break even? To earn net income of $117,600? 3. Compute net income if the number of customers is 170,000. Requirement 1. Compute the revenues needed to eam the target net income. Using the equation method, select the basic formula used to compute the revenues needed to eam the target net income. Target net income 1-Tax rate Revenues Variable costs Fixed costs 1,023,750 The revenues needed to earn the target net income is $ Requirement 2. How many customers are needed to break even? To earn net income of $117.600? Determine the formula that is used to compute how many customers are needed to break even, then compute the number of customers needed. Customers needed to break even Choose from any drop-down list
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