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The Boardwalk has Rides, Food, and special group events
The Boardwalk has Rides, Food, and special group events. Category % of Business Contribution Margin Rides Food special Events 60% 25% 15% 60% 40% 80% Fixed Costs are 4,292,000 for a year what is the break even revenue for a year and how much is each category Rides Food special Events Total 9 A company makes phones, pads and laptops. The Income for each is below: Phones Pads Laptops Revenue $ 1,000,000 $ 664,200 $ 100,000 Variable Costs $ 600,000 $ 378,520 $ 76,000 Contribution Margin $ 400,000 $ 285,680 $ 24,000 Fixed Costs $ 300,000 $ 227,940 $ 50,000 Net Income 100,000 $ 57,740 $ (26,000) They are considering getting out of the laptop business. If they stop selling laptops all the variable costs for that division will go away and 30,000 of the fixed costs will be eliminated. Should they eliminate the Laptop Division or not? And Why...show the numbers A A A A
Expert Solution
Dear Student,
SOLUTION 8
Suppose total revenue in $ is x.
| Year | Sales Ratio | Revenue | Contribution (in %) |
Total Contribution |
| Rides | 60% | 0.60x | 60% | 0.36x |
| Food | 25% | 0.25x | 40% | 0.10x |
| Special Events | 15% | 0.15x | 80% | 0.12x |
| TOTAL | 100% | x | 4292000 |
Total Contribution = Revenue x Contrubution %
At break even point, Total Contribution will be equal to Fixed Costs
0.36x + 0.10x + 0.12x = 4292000
0.58x = 4292000
x = 7400000
| Year | Revenue | Revenue |
| Rides | 0.60x | 4440000 |
| Food | 0.25x | 1850000 |
| Special Events | 0.15x | 1110000 |
| Break even revanue | x | 7400000 |
Please find break even total revanue and division wise as above.
SOLUTION 9
If we discontinue business of Laptops then loss will decrease from $ 26,000 to $ 20,000. So they should eliminate the Laptop division to save $ 6,000.
| LAPTOPS | IF business is continued | IF business is discontinued |
| Revanue | 100000 | 0 |
| Variable Costs | 76000 | 0 |
| Contribution Margin | 24000 | 0 |
| Fixed Costs | 50000 | 20000 |
| Net Income | -26000 | -20000 |
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