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Homework answers / question archive / P16:29 Contribution Income Statement, Cost-Volume-Profit Graph, and Taxes Jail and Sail: Alcatraz Tour and Cruise provides sunset sightseeing tours of Alcatraz and the San Francisco Bay

P16:29 Contribution Income Statement, Cost-Volume-Profit Graph, and Taxes Jail and Sail: Alcatraz Tour and Cruise provides sunset sightseeing tours of Alcatraz and the San Francisco Bay

Accounting

P16:29 Contribution Income Statement, Cost-Volume-Profit Graph, and Taxes Jail and Sail: Alcatraz Tour and Cruise provides sunset sightseeing tours of Alcatraz and the San Francisco Bay. Tickets cost $140 each. Assume 2,200 customers were served in July
Cambridge Business Pakistan Hule 16 Cost-Volume-Profit Analysis and Planning Fixed Costs per Month Variable Costs per Customer Admission fees. Overhead .... Hors d'oeuvres. Selling and administrative. Total .... $60 Operations 25 Selling and administration 15 2 $102 Total 1295 525 Jail and Sail is subject to an income tax rate of 21%. Required a. Prepare a contribution income statement for July. b. Determine Jail and Sail's monthly break-even point in units. c. Determine Jail and Sail's margin of safety in units for July. d. Determine the unit sales required for a monthly after-tax profit of $20,000. e. Prepare a cost-volume-profit graph. Label the horizontal axis in units with a maximum value of 4,000. Label the vertical in dollars with a maximum value of $600,000. Draw a vertical line on the graph for the current (2,200) unit level and label total variable costs, total fixed costs, and med before-tax profits at 2.200 units.

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a)

Variable Costing Income Statement for July    
  Note Amount $
Tickets Sold   2200
Sales (Sales Price* Tickets Sold) (WN-1) A              308,000
Cost of Goods sold (VC per ticket*Tickets Sold) B              220,000
Gross Contribution C=A-B                 88,000
Less: Variable Selling and Administration Expenses D                   4,400
Contribution Margin E=C-D                 83,600
Less: Fixed Cost    
Fixed Overheads -operations F                 50,000
Selling and Administration Expenses G                 12,500
Operating Income Before Interest and Taxes (EBIT) H=E-F-G                 21,100
WN 1 - Calculating Variable Cost per Ticket (VC per Ticket)  
  Amount $
Admission Fees                         60.00
Overhead                         25.00
Hors d'oeuvers                         15.00
Cost per Unit                       100.00

2) Assumption : Selling and Administration Expenses (Variable+Fixed) are not directly related to production. Hence not consider for calculation

Break-even Point (Units) = Fixed Costs / (Revenue Per Unit – Variable Cost Per Unit)
Break-even Point (Units) = $ 50,000 / $ (140-100) = 1250 units

3)

Break-even (Sales) = BEP Units* Sales Price per units= 1250 units *140 = $175,000
Margin of Safety (Sales)= Actual sales – Break-even sales = $308,000 -$175,000 = $133,000
Margin of Safety (Units)= Margin of Safety (Sales)/ Selling Price per unit = $133,000/140 = 950 Units

2) Assumption : Selling and Administration Expenses (Variable+Fixed) are directly related to production. Hence consider for calculation

Break-even Point (Units) = $ 62,500 / $ (140-102) = 1644.74 units

3) Margin of Safety (Units)= Total Units - BEP Units = 2200 -1644.74 = 555.26 Units

4)

  Note Amount $
Profit After Tax A           20,000.00
Tax @ 21% of EBIT (20000*100/79) B             5,316.45
Operating Income Before Interest and Taxes (EBIT) C=A+B           25,316.45
Fixed Cost    
Fixed Overheads -operations D           50,000.00
Selling and Administration Expenses E           12,500.00
Contribution Margin F=C+D+E           87,816.45
Selling cost per ticket G                 140.00
Total varibale cost per ticket H                 102.00
Contribution per ticket I= G-H                   38.00
No of Units (Sales ) required F/I             2,310.96
     

E) Graph : Image attached

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