Answer:
See the explanation below.
Explanation:
1 a. Calculate the number of tickets Sunset must sell each month to break even.
Selling price = 6% * $1,500 = $90 per ticket
Variable cost per unit = $43 per ticket
Contribution margin per unit = $90 – $43 = $47 per ticket
Fixed cost = $23,500
Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $47 = 500 tickets
1 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.
Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $47 = 712.77, or 713 tickets
2 a. Calculate the number of tickets Sunset must sell each month to break even.
Selling price = 6% * $1,500 = $90 per ticket
Variable cost per unit = $40 per ticket
Contribution margin per unit = $90 – $40 = $50 per ticket
Fixed cost = $23,500
Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $50 = 470 tickets
2 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.
Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $50 = 670 tickets
3 a. Calculate the number of tickets Sunset must sell each month to break even.
Selling price = $60 per ticket
Variable cost per unit = $40 per ticket
Contribution margin per unit = $60 – $40 = $20 per ticket
Fixed cost = $23,500
Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $20 = 1,175 tickets
3 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.
Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $20 = 1,675 tickets
Comment:
Due a fall in commission, there are appreciable increases in the break-even point and the number tickets that have to be sold to meet a targeted operating income of $10,000.
4 a. Calculate the number of tickets Sunset must sell each month to break even.
Selling price = $60 + $5 = $65 per ticket
Variable cost per unit = $40 per ticket
Contribution margin per unit = $65 – $40 = $25 per ticket
Fixed cost = $23,500
Break-even tickets per month = Fixed cost / Contribution margin per unit = $23,500 / $25 = 940 tickets
4 b. Calculate the number of tickets Sunset must sell each month to make a target operating income of $10,000 per month.
Number of tickets = (Fixed cost + Targeted profit) / Contribution margin per unit = ($23,500 + $10,000) / $25 = 1,340 tickets
Comment:
The $5 delivery fee brings about an increased contribution margin higher than before, which makes both the break-even point and the tickets sold to achieve operating income of $10,000 to fall.
