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Chapter 20: Q20-16RQ (page 1119)
Question: Of the three approaches to calculate sales required to achieve the breakeven point, which one(s) calculate the required sales in units and which one(s) calculate the required sales in dollars?
Answer
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What is the purpose of using the high-low method?
Use the following information to complete Short Exercises S20-10 through S20-15.
Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at \(70 per person as a one-day entrance fee. Variable costs are \)42 per person, and fixed costs are $170,800 per month.
S20-15 Computing degree of operating leverage
Refer to the original information (ignoring the changes considered in Short Exercises S20-12 and S20-13). If Funday Park expects to sell 8,100 tickets, compute the degree of operating leverage (round to two decimal places). Estimate the operating income if sales increase by 15%.
Question: Computing contribution margin in total, per unit, and as a ratio
Complete the table below for contribution margin per unit, total contribution margin, and contribution margin ratio:
A B C Number of units 1,720 units 14,920 units 4,620 units
Sales price per unit \( 1,800 \) 4,500 $ 5,550
Variable costs per unit 720 3,600 1,665
Calculate:
Contribution margin per unit
Total contribution margin
Contribution margin ratio
A chain of convenience stores has one manager per store who is paid a monthly salary. Relative to Store #36 located in Atlanta, Georgia, is the manager’s salary fixed or variable? Why?
Use the following information to complete Short Exercises S20-16 and S20-17.
Wild Waters Swim Park sells individual and family tickets. With a ticket, each person receives a meal, three beverages, and unlimited use of the swimming pools. Wild Waters has the following ticket prices and variable costs for 2018:
Individual Family Sales price per ticket \( 50 \) 150 Variable cost per ticket 35 140
Wild Waters expects to sell one individual ticket for every four family tickets. Wild Waters’s total fixed costs are $27,500.
S20-16 Calculating breakeven point for two products
Using the Wild Waters Swim Park information presented, do the following tasks.
Requirements
1. Compute the weighted-average contribution margin per ticket.
2. Calculate the total number of tickets Wild Waters must sell to break even.
3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.
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