Homework SourseUsing the information attached calculate the following A Con
Using the information attached calculate the following:
A. Contribution margin per units of service ( a unit of service is one nights accomodation for one guest)
B. Contribution margin ratio
C. Annual break even point in units of service in dollars of service revenue
D. Margin of safety in dollars and in percentage, assuming that the actual revenue during the year is $150,000
E. Number of units of service required to earn a target profit of $140,000 for the year
Strawberry Villa is a hotel located near Nambour in Queensland. The charge of $100 per person is for one night\'s accommodation with a full breakfast in the morning. Joe Smith, t owner-manager of the hotel, estimates that the variable cost per person is $30. This includes costs to cover for cleaning, utilities and food. The hotel\'s fixed costs amount to $84 000 per year, which include land taxes and council rates he Solution
Strawberry Villa :
A) Contribution Margin per unit :
B) Contribution margin ratio = Contribution / Sales *100 = 70/100 * 100 = 70%
c) Annual break even point (units) = Fixed cost / contribution per unit = 84000/70 = 1200 units.
D) Margin of safety ($) = Total sales - break even sales
Actual sales = $ 150000
Less : break even sales (1200*100) = ($120000)
Margin of safety sales = $ 30,000
-> Margin of safet % = (Actual sales - break even sales ) / actual sales *100
(150000-120000)/150000*100 = 20%
E) Target profit = $140,000
No of units required to generate the profit of $140,000 = Fixed cost + profit / contribution per unit
= 84000+140000/70
= 3200 units
| Particulars | Amount($) |
| Selling price per person | 100 |
| Less : Variable cost | (30) |
| Contribution margin per unit | 70 |
