The following information is from the records of daphne\'s restaurant. Sales $40
ID: 2422481 • Letter: T
Question
The following information is from the records of daphne's restaurant.
Sales $400000 cost of sales 140000 cost of labor 104000 cost of overhead 120000
Assume that the given cost of labor is 30.0% variable and 70.0% fixed.
a. calculate profit
b. calculate breakeven point in dollars
c. calculate dollar sales required to earn a profit of $50000
d. if variable costs increase by $8000, what level of dollar sales will be required to earn a profit of $36000?
e. if cost of overhead increases by 10%, what level of dollar sales will be required to earn the $36000 profit?
Explanation / Answer
Answer a. Particulars Amount Sales 400000 Less: Variable Cost Cost of Sales 140000 Cost of Labor 104000 Cost of Overhead (30% of 120000) 36000 280000 Conribution 120000 Less: Fixed Overhead 84000 Net Profit 36000 Answer b Break even point in Dollars = Fixed Cost / Contribution Margin ratio Contribution margin Ratio = Contribution / Sales X 100 Contribution margin Ratio = 120000/400000 X 100 = 30% Break even point in Dollars = 84000 / 30% = $280000 Answer c. Sales to attain Targeted profit = (Fixed Cost + Targeted Profit) / Contribution Margin ratio Sales to attain Targeted profit = (84000 + 50000)/30% = $446,666.67 or $446,667 Answer d. Variable Cost is increased by $8000 New Variable Cost = +280000+6000 = $286000 Contribution = 400000-286000 = $114000 Contribution Margin Ratio = 114000 / 400000 = 28.50% Sales to attain Targeted profit = (84000 + 36000)/28.50% = 421052.63 or $421053 Answer e. Cost of Overhead incresed by 10% Particulars Amount Sales 400000 Less: Variable Cost Cost of Sales 140000 Cost of Labor 104000 Cost of Overhead 39600 283600 Conribution 116400 Less: Fixed Overhead 92400 Net Profit 24000 Contribution Margin Ratio 29.10% Sales to attain Targeted profit = (92400 + 36000)/29.10% = 441237.11 or $441237
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