Reference no: EM132316876

Question :

Break-even analysis for a service company

Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $60,300. Costs and expenses for the year were as follows:

Cost of revenue				$24,100
Selling, general, and administrative expenses				19,300
Depreciation				6,600

Assume that 70% of the cost of revenue and 40% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place.

a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number.

b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar.

Break-Even Sales

Currently, the unit selling price of a product is $390, the unit variable cost is $320, and the total fixed costs are $1,512,000. A proposal is being evaluated to increase the unit selling price to $440.

a. Compute the current break-even sales (units).

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased to the proposed $440, and all costs remain constant.

Break-Even Sales and Sales to Realize Income from Operations

For the current year ending October 31, Yentling Company expects fixed costs of $579,600, a unit variable cost of $56, and a unit selling price of $84.

a. Compute the anticipated break-even sales (units).

b. Compute the sales (units) required to realize income from operations of $134,400.

Contribution Margin and Contribution Margin Ratio

For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):

Sales	$14,800
Food and packaging	$5,928
Payroll	3,700
Occupancy (rent, depreciation, etc.)	2,532
General, selling, and administrative expenses	2,200
	$14,360
Income from operations	$440

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)

b. What is Wicker Company's contribution margin ratio? Round to one decimal place.

c. How much would income from operations increase if same-store sales increased by $900 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.