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