Calculate the break-even point, Financial Management

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A Video Rental store has two employees. The Supervisor is paid $2,200 per month. The other employee, Mark is paid $1,200 per month. In addition, Mark is paid a commission of 20 cents per video that is rented. Other monthly costs are:

• Store rent $1,000 plus 10 cents per rented video

• Depreciation on videos $1,000

• Utilities $400

• Advertising $400

• The rental fee for a movie is $2.00

All answers to the questions below must cite relevant supporting formulas used and show all detailed calculations showing the exact steps on how each of the answers were calculated in Microsoft Word format:

a) Calculate the variable cost per rented video and the total monthly fixed costs.

b) Calculate the break-even point in units and dollars.

c) Calculate the margin of safety and the margin of safety ratio, assuming 5,000 videos are rented in a month.

d) Calculate the rentals required to earn net income of $2,000.


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