Biscayne\'s Rent-A-Ride rents two models of automobiles the standard and the del
ID: 2555429 • Letter: B
Question
Biscayne's Rent-A-Ride rents two models of automobiles the standard and the deluxe. Information follows: Standard Deluxe Rental price per $48.00 $58.00 Variable cost per 14.40 20.30 Biscayne's total fixed cost is $17,094 per month Required: 1. Determine the contribution margin per rental day and contribution margin ratio for each model that Biscayne's offers. (Round your "Unit Contribution Margin' answers to 2 decimal places.) Contribution Margin- Contribution per sol Deyl 37.70 Day a l 2. Which model would Biscayne's prefer to rent? "Dolucoe Model Standard Model 3. Calculate Biscayne's break-even point the product mix is 50/50. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Break- Even Point Rental Days 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.) Break- Even Point Rental Days 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.) Break- Even RentalExplanation / Answer
1)Calculation of contribution margin per rental day: Contribution margin = selling price- variable cost per unit Standard Unit contribution margin=48-14.40=$33.60 Deluxe Unit contribution margin=58-20.30=$37.70 Calculation of contribution margin ratio" Contribution margin ratio= Contribution/selling price*100 Standard Contribution margin ratio= 33.60/48*100=70% Deluxe Contrbution margin ratio=37.70/58*100=65% 2) As contribution margin ratio of standard is more so it should be preferred. 3) Calculation of break even point: Break even point= fixed cost/ contribution per rental day Contribution per rental day=33.60*0.5+37.7*0.5=$35.65 Break even point=17094/35.65=479 rental days 4) Calculation of break even point: Break even point= fixed cost/ contribution per rental day Contribution per rental day=33.60*0.75+37.7*0.25=$34.625 Break even point=17094/34.625=494 rental days 5) Calculation of break even point: Break even point= fixed cost/ contribution per rental day Contribution per rental day=33.60*0.25+37.7*0.75=$36.675 Break even point=17094/36.675=466 rental days
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