accounting 3314 Biscayne\'s Rent-A-Ride rents two models of automobiles: the sta

ID: 2503910 • Letter: A

Question

accounting 3314

Biscayne's Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: Standard Deluxe 56.00 $47.00 Rental price per day Variable cost per day 42.00 23.50 Biscayne's total fixed cost is $16,125 per month Required: 1. Determine the contribution margin per rental day and contribution margin ratio for each model that Biscayne's offers. (Round your "UnitContribution Margin" answers to 2 decimal places.) Deluxe per Day Unit Contribution Margin per Day Contribution Margin Ratio 3. Calculate Biscayne's break-even point if the product mix is 50/50. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Rental Days Break-Even Point 4. Calculate the break-even point if Biscayne's product mix changes so that the standard model is rented 75 percent of the time and the deluxe model is rented for only 25 percent. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Rental Days Break-Even Point 5. Calculate the break-even point if Biscayne's product mix changes so that the standard model is rented 25 percent of the time and the deluxe model is rented for 75 percent. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Rental Days Break-Even Point

Explanation / Answer

PART-1:-

UNIT CONTRIBUTION MARGIN FOR STANDARD = 56-42

= 14 PER DAY

CONTRIBUTION MARGIN RATIO FOR STANDARD = 14/56 * 100

=25%

UNIT CONTRIBUTION MARGIN FOR DELUXE = 47-23.50

= 23.50

CONTRIBUTION MARGIN RATIO FOR DELUXE = 23.50/47 * 100

= 50%

PART-3:-

WEIGTHED CONTRIBUTION MARGIN RATIO IF PRODUCT MIX IS 50/50 = 25*0.5 + 50*0.5

= 37.50%

BREAKEVEN POINT IF PRODUCT MIX IS 50/50 = FIXED COST/ WEIGTHED CONTRIBUTION MARGIN

= 16125/0.375

=$43000

PART-4:-

WEIGTHED CONTRIBUTION MARGIN RATIO IF PRODUCT MIX IS 75/25 = 25*0.75 + 50*0.25

= 31.25%

BREAKEVEN POINT IF PRODUCT MIX IS 75/25 = FIXED COST/ WEIGTHED CONTRIBUTION MARGIN

= 16125/0.3125

=$51600

PART-5:-

WEIGTHED CONTRIBUTION MARGIN RATIO IF PRODUCT MIX IS 25/75 = 25*0.25 + 50*0.75

= 43.75%

BREAKEVEN POINT IF PRODUCT MIX IS 25/75 = FIXED COST/ WEIGTHED CONTRIBUTION MARGIN

= 16125/0.4375

= $36857.14