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Accounting

1. E Çözün Art?k Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $456,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $9.50. The average cost of food and other variable costs for each customer is $3.80. The income tax rate is 30%. Target net income is $159,600.

Required:

  1. Calculate the unit contribution margin and contribution margin percentage (10 pts)
  2. Compute the revenues needed to earn the target net income. (10 pts)    
  3. How many customers are needed to break even? To earn net income of $159,600? (10 pts)
  4. Compute net income if the number of customers is 145,000 (10 pts).

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a.
Unit Contribution Margin = Average Sales - Average Variable Cost
= $9.50 - 3.80 = $5.70

Contribution Margin percentage = Contribution Margin / Sales
= $5.70 / 9.50 = 60%

b.
Target Pretax income = $159600 / 70% = $228000

Revenes required = (Fixed Costs +target income) / Contribution Margin ratio
= ($456000+228000) / 60% = $1,140,000

c.
Break even = Fixed Costs / Unit Contribution Margin
= $456000 / 5.7 = 80000 customers

Customers required = (Fixed Costs +target income) / Unit Contribution Margin
= ($456000+228000) / 5.7 = 120000 customers

d.

Sales $       1,377,500
Variable Costs $          551,000
Contribution Margin $          826,500
Fixed Costs $          456,000
Net Operating Income $          370,500
Income Tax Expense $          111,150
Net Income $          259,350

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