Homework Help is Here – Start Your Trial Now!
Business
Accounting
What is the break-even point in sales dollars for RBC? What is the margin of safety for RBC? What amount of sales dollars would be required to achieve an operating profit of $220,000? $420,000?

What is the break-even point in sales dollars for RBC? What is the margin of safety for RBC? What amount of sales dollars would be required to achieve an operating profit of $220,000? $420,000?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

What is the break-even point in sales dollars for RBC?

What is the margin of safety for RBC?

What amount of sales dollars would be required to achieve an operating profit of $220,000? $420,000?

It became clear to the owners of RBC that the Initlal 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 (48% of total sales) Food sales (48% of total sales) Other sales (12% of total sales) $832,000 998, 400 249,600 Total sales $2,880, e00 Variable Costs Beer (13% of beer sales) Food (34% of food sales) Other (29% of other sales) Wages of employees (21% of sales) Supplies (3% of sales) Utilities (4% of sales) $188,160 339,456 72, 384 436, 800 62,400 83, 200 Other: credit card, misc. (3% of sales) 62,400 Total variable costs $1,164, 800 Contribution margin Fixed Costs $ 915, 200 $133, 000 24,000 Salaries: manager, chef, brewer Maintenance Advertising 11,000 Other: cleaning, menus, misc Insurance and accounting 32, 00e Property taxes Depreciation Debt service (interest on debt) 39, 000 23,000 91,900 127,000 Total fixed costs $ 480, 000 Operating profit 435, 200
Transcribed Image Text:It became clear to the owners of RBC that the Initlal 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 (48% of total sales) Food sales (48% of total sales) Other sales (12% of total sales) $832,000 998, 400 249,600 Total sales $2,880, e00 Variable Costs Beer (13% of beer sales) Food (34% of food sales) Other (29% of other sales) Wages of employees (21% of sales) Supplies (3% of sales) Utilities (4% of sales) $188,160 339,456 72, 384 436, 800 62,400 83, 200 Other: credit card, misc. (3% of sales) 62,400 Total variable costs $1,164, 800 Contribution margin Fixed Costs $ 915, 200 $133, 000 24,000 Salaries: manager, chef, brewer Maintenance Advertising 11,000 Other: cleaning, menus, misc Insurance and accounting 32, 00e Property taxes Depreciation Debt service (interest on debt) 39, 000 23,000 91,900 127,000 Total fixed costs $ 480, 000 Operating profit 435, 200
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 832, e00 998,400 249,600 Beer sales Food sales Other sales Total sales $2,080, 000 520, 000 Less cost of sales Gross margin Less marketing and administrative expenses $1,560, 000 1,124, 800 Operating profit $ 435, 200 In the process of pursulng 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 polnt? • What sales dollars will be required to make $220,000? To make $420,000? • 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?
Transcribed Image Text: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 832, e00 998,400 249,600 Beer sales Food sales Other sales Total sales $2,080, 000 520, 000 Less cost of sales Gross margin Less marketing and administrative expenses $1,560, 000 1,124, 800 Operating profit $ 435, 200 In the process of pursulng 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 polnt? • What sales dollars will be required to make $220,000? To make $420,000? • 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?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Strategic business units
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS