ACCOUNTING

ACCOUNTING

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Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farm machinery. The firm’s fixed costs are 3,200,000 p per year. The variable cost of each component is 1,200 p, and the components are sold for 3,400 p each. The company sold 5,500 components during the prior year. (p denotes the peso, Argentina’s national currency. Several countries use the peso as their monetary unit. On the day this exercise was written, Argentina’s peso was worth .327 U.S. dollar. In the following independent requirements, ignore income taxes.)

 

Required:

 

1.	Compute the break-even point in units. (Round your answer to the nearest whole number.)

 

Break-even point

components

2.	What will the new break-even point be if fixed costs increase by 15 percent? (Round your answer to the nearest whole number.)

 

New break-even point

components

 

3.	What was the company’s net income for the prior year? (Omit the “p” sign in your response.)

 

Net income

p

 

4.	The sales manager believes that a reduction in the sales price to 2,900 p will result in orders for 1,400 more components each year. What will the break-even point be if the price is changed? (Round your answer to the nearest whole number.)

 

New break-even point

components

 

The Houston Armadillos, a minor-league baseball team, play their weekly games in a small stadium just outside Houston. The stadium holds 8,400 people and tickets sell for $12 each. The franchise owner estimates that the team’s annual fixed expenses are $189,000, and the variable expense per ticket sold is $3. (In the following requirements, ignore income taxes.)

 

Required:

 

2.	If the stadium is half full for each game, how many games must the team play to break even?

 

Team must play

games

 

The Houston Armadillos, a minor-league baseball team, play their weekly games in a small stadium just outside Houston. The stadium holds 11,000 people and tickets sell for $11 each. The franchise owner estimates that the team’s annual fixed expenses are $170,000, and the variable expense per ticket sold is $4. (In the following requirements, ignore income taxes.)

 

Required:

 

2.	What is the safety margin for the baseball franchise if the team plays a 12-game season and the team owner expects the stadium to be 45 percent full for each game? (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)

 

Safety margin

$

 

3.	If the stadium is half full for each game, what ticket price would the team have to charge in order to break even? (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)

 

Price

$   per ticket

 

Fill in the missing data for each of the following independent cases. (Ignore income taxes.) (Leave no cells blank – be certain to enter “0” wherever required. Do not round your intermediate calculations. Omit the “$” sign in your response.)

 

	Sales Revenue			Variable Expenses			Total Contribution Margin			Fixed Expenses			Net Income			Break-Even Sales Revenue
1.	$			$	40,000		$			$	30,000		$			$	40,000
2.		80,000						15,000									80,000
3.					40,000			80,000						50,000
4.		110,000			22,000									38,000

 

College Pizza delivers pizzas to the dormitories and apartments near a major state university. The company’s annual fixed expenses are $40,000. The sales price of a pizza is $10, and it costs the company $5 to make and deliver each pizza. (In the following requirements, ignore income taxes.)

 

Required:

 

1.	Using the contribution-margin approach, compute the company’s break-even point in units (pizzas).

 

Break-even point

pizzas

 

2.	What is the contribution-margin ratio? (Round your answer to 1 decimal place.)

 

Contribution-margin ratio

 

3.	Compute the break-even sales revenue. Use the contribution-margin ratio in your calculation. (Omit the “$” sign in your response.)

 

Break-even point

$

 

4.	How many pizzas must the company sell to earn a target net profit of $65,000? Use the equation method.

 

Number of pizzas