Highway driving school charges $560 per student to prepare and administer writte
ID: 2418472 • Letter: H
Question
Highway driving school charges $560 per student to prepare and administer written and driving tests. Variable costs of $280 per student include trainers' wages, study materials, and gasoline. Annual fixed costs of $92400 include the training facility and the fleet of cars.
1. For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided:
a. Breakeven point with no change in information
b. decrease sales price to $400 per student
c. decrease variable costs to $224 per student
d. decrease fixed costs to $81200
2. Compare the impact of changes in the sales price, variable costs, and fixed costs on the contribution margin per unit and the breakeven point in units.
Explanation / Answer
a) Statement showing computations Particulars Amount Charge Per Student 560.00 Variable Cost per Student 280.00 Contribution per Student = 560-280 280.00 Fixed Costs 92,400.00 BEP in Units = FC/Cont pu BEP in Units = 92,400/280 330.00 b) Charge Per Student 400.00 Variable Cost per Student 280.00 Contribution per Student = 400-280 120.00 Fixed Costs 92,400.00 BEP in Units = FC/Cont pu BEP in Units = 92,400/120 770.00 c) Charge Per Student 560.00 Variable Cost per Student 224.00 Contribution per Student = 560-224 336.00 Fixed Costs 92,400.00 BEP in Units = FC/Cont pu BEP in Units = 92,400/336 275.00 d) Charge Per Student 560.00 Variable Cost per Student 280.00 Contribution per Student = 560-280 280.00 Fixed Costs 81,200.00 BEP in Units = FC/Cont pu BEP in Units = 81,200/280 290.00 a) b) c) d) Cont pu 280.00 120.00 336.00 280.00 BEP in Units 330.00 770.00 275.00 290.00
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