Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can someone help me with breakeven problems and safety margin problems? Thank you so much! Assume that you are Janice Wilton and you have been

Can someone help me with breakeven problems and safety margin problems? Thank you so much!

image text in transcribed Assume that you are Janice Wilton and you have been asked to elaborate on the memo in Exhibit 1 to address the issues raised by Ted Radcliff in both of his conversations with you. Use the report form from the course website and please be certain to address all of the following issues: Q. 1. What conditions would justify the assumption of a constant contribution margin per customer? Do you think those conditions are likely to hold here? To support your conclusions, do a scatter plot of the sample data, and then use the sample data to run a regression of purchase costs (dependent variable) on purchase revenues (independent variable). [Hint: What is the meaning of the intercept term of your regression results?] Q. 2. Is there good reason to believe that evening customers purchase, on average, more than day customers? Support your answer by performing a statistical test on the difference between the mean day purchase and the mean evening purchase (using a two-tail test). Q. 3. Is Janice using marginal cost and marginal revenue correctly in her analysis? Explain the errors in her analysis, if any. [Hint: Think about Ted Radcliff's questions.] Q. 4. What closing time should 21st Century Liquors choose to maximize profits? Calculate the increase in profits (relative to the current closing time of 10pm) that would result from extending store hours to 4am. If you recommend a different closing time, calculate the increase in profits (again relative to the current closing time) that would result from your recommendation. Q. 5. a. Calculate the breakeven number of additional customers for each added hour of operation up to 4am. b. Calculate the breakeven number of additional customers for an entire year, assuming (i) a closing time of 4am and then (ii) your recommended closing time, if it differs from 4am. c. Find the safety margin on new customers for the year. [Hint: For the per-year analysis, remember to account for the cost of the security upgrade. Use straightline depreciation as a measure of the fixed cost of the security upgrade, and then add the cost of overtime labor for the additional hours of business for each of the 360 business days in the year.] Q. 6. If there are any additional issues you think are relevant to the choice of closing time, be sure to mention them. Is there anything missing from the analysis? Are there any matters that require additional data collection or research? The contribution margin I calculated is 7.18 ( I use revenue minus cost, and then find the average number, but I'm not sure if its right). For the depreciation cost is 3000 per year. Other data is on the following pages. Thank you so much for helping

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Carl S. Warren, Christine Jonick, Jennifer Schneider

16th Edition

1337913103, 9781337913102

More Books

Students also viewed these Accounting questions

Question

What are the steps in the development of data warehouses?

Answered: 1 week ago

Question

Explain the factors that determine the degree of decentralisation

Answered: 1 week ago

Question

What Is acidity?

Answered: 1 week ago

Question

Explain the principles of delegation

Answered: 1 week ago

Question

State the importance of motivation

Answered: 1 week ago

Question

Discuss the various steps involved in the process of planning

Answered: 1 week ago

Question

Always have the dignity of the other or others as a backdrop.

Answered: 1 week ago