Solution manual managerial accounting and finance for hospitality OperationsCHAPTER 07

COST-VOLUME-PROFIT APPROACH TO DECISIONSI.. Use the equation: Sales = II.. Practical Exercises and Problems A... Break-even sales EXERCISE 6 Requirement a Since the firm has sales revenu

COST-VOLUME-PROFIT APPROACH TO DECISIONS

I Questions

1 Refer to pages 172 and 173

2 Refer to pages 172 and 173

3 Refer to page 173

4 Use the equation: Sales =

II Practical Exercises and Problems

A EXERCISES

EXERCISE 1

Food Beverage

Total or Combined CM = 52% + 13.4%

= 65.4%

EXERCISE 2

Break-even sales revenue

EXERCISE 3

Break-even sales revenue

=

P100,800

1 – P240,000P96,000

= P100,800 1 – 0.40 = P168,000

= P240,000 0.48 = P500,000 Fixed Cost + Desired Profit Contribution Margin Ratio

EXERCISE 4

Contribution margin = P 125 – P75

Break-even (units)

EXERCISE 5

a Selling price P129.50

Variable cost 54.40

Contribution margin P 75.10

b Break-even (units)

c Variable cost percentage

d Contribution %

e Break-even sales

EXERCISE 6

Requirement (a)

Since the firm has sales revenue of P444,000, no additional sales are needed to generate the desired profit

Requirement (b)

Sales to earn net income

after tax of P48,000

= P400,000 P50 = 8,000 units

= P1,400,000 P75.10 = 18,642 units

= P129.50P54.40 = 42%

= P129.50P75.10 = 58%

= P1,400,00058% = P2,143,793

P188,482 + 1 – 0.28P48,000

= P188,482 + P66,666.66658%

= P439,911.49

EXERCISE 7

B PROBLEMS

PROBLEM 1

Requirement (a)

Break-even sales revenue

Requirement (b)

Variable Cost (52%) 2,288,000

Contribution Margin P2,112,000

Requirement (c)

No of customers served

at P5 million sales level P50,000

at P4.4 million sales level 44,000

=

P1,600,000

1 – P2,600,000P5,000,000

= P1,600,000 1 – 0.52 = P3,333,333.33 P6,000

26% = P23,077

PROBLEM 2

Requirement (a)

Break-even sales

Requirement (b)

Sales

PROBLEM 3

Requirement (1)

CM Rate Weight Weighted CM

Requirement (2)

Break-even point

Contribution margin: at Break-even

= 1 – 75%P98,320 =

= P393,280

P98,320 25%

= P98,320 + P30,00025%

= P513,280

3.2M

4 M 0.15M 1.2 M 0.25M 0.60 M 0 0.20M

= P1,600,000 + P1,700,00060%

= P5,500,000

Telephone 5.5 M x 0 0

P3,300,000

Requirement (3)

Revenue to yield Net

income of P500,000

CM at P500,000 profit

Rooms P6,333,333 x 53.34% P3,378,200

Beverage 6,333,333 x 4.16% 263,467

Telephone 6,333,333 x 0 0

Sales

Rooms (6,333,333 x 66.67%) 4,222,433 x 80.00% P3,377,946 Food (6,333,333 x 20%) 1,266,667 x 12.50% 158,333 Beverage (6,333,333 x 10%) 633,333 x 41.67% 263,910 Telephone (6,333,333 x 3.33%) 210,900 x 0 0

* 189: rounding off difference

Requirement (4)

Rooms revenue when profit equals P500,000 = P6,333,333 x 66.67%

= P4,222,433

Requirement (5)

Break-even point if FC increase by P300,000 =

= P6,000,000

= P3,300,000 + P500,00060%

= P6,333,333

P3,300,000 + P300,000

60%

Requirement (6)

Break-even point if FC increase by P300,000

and revenues increase by 10% through =

price increases

= P5,654,154

CM Rate Weight Weighted CM rate

PROBLEM 4

Requirement (1)

Break-even point (P)

Requirement (2)

Margin of safety in revenues = P45,000 – P29,850.75

= P15,149.25

Margin of safety in rooms =

= 1,500 – 995

= 505

=

P20,000

1 – P10P30

= 1 – 0.33P20,000 = P29,850.75 per month

P3,300,000 + P300,000

63.67%

3.6M 4.4 M 0.27M 1.32 M 310T 660T 20T 200T

45,000 30

Requirement (3)

S

Requirement (4)

Occupancy percentage is 100%

= 50 rooms x 30 days in a month

= 1,500 rooms

= 20,000 + 10,00020

= 1,500 rooms