2-A2 Cost-Volume-Profit and Vending Machines

Vendmart Food Services Company operates and services snack vending machines located in restau- rants, gas stations, and factories in four southwestern states. The machines are rented from the manu- facturer. In addition, Vendmart must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 80 machines. Fixed monthly expenses follow:

Machine rental: 80 machines @ $22.10 = $1,768

Space rental: 80 locations @ $20.00 = $1,600

Part-time wages to service the additional 80 machines = $500

Other fixed costs = $132

Total monthly fixed costs = $4,000

Other data follow:

Per Unit (Snack) Per $100 of Sales

Selling price $1.00 100%

Cost of snack $ .68 68%

Contribution margin $ .32 32%

These questions relate to the given data unless otherwise noted. Consider each question independently.

1. What is the monthly break-even point in number of units (snacks)? In dollar sales?

2. If 45,000 units were sold, what would be the company's net income?

3. If the space rental cost was doubled, what would be the monthly break-even point in number of units? In dollar sales?

4. Refer to the original data. If, in addition to the fixed space rent, Vendmart Food Services Company paid the vending machine manufacturer $.07 per unit sold, what would be the monthly break- even point in number of units? In dollar sales?

5. Refer to the original data. If, in addition to the fixed rent, Vendmart paid the machine manufac- turer $.11 for each unit sold in excess of the break-even point, what would the new net income be if 45,000 units were sold?