Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help - Amy is opening a snowboard rental store. She will rent snowboards to customers for skiing on a weekly basis for $75 per

image text in transcribed
please help
- Amy is opening a snowboard rental store. She will rent snowboards to customers for skiing on a weekly basis for $75 per week including the boots. The skiing season is 20 weeks long. Amy can buy a set of snowboard and boots for $550, rent them to customers for a season, and sell them for $250 at the end of the season. The store rent is $7,200 per year. During the off-season, Amy will sublet the store for $1,600. Salaries, advertising and office expenses are $26,000 per year. After each rental, the boards must be resurfaced and the boots cleaned and deodorized. Labor (not included in the $26,000) and materials to prepare the board and boots to be re-rented cost $7 per rental. a. Amy is trying to determine the minimum number of boards to purchase. She expects to rent 80% of the boards in any given week. Determine Amy's total fixed costs for the year, and the contribution margin per board per year. Using this information, how many boards must Amy purchase in order to break even? (do not round). b. Suppose that Amy purchased 50 boards. What profit should she expect, assuming that she expects to rent 80% of the boards in any given week? c. Suppose Amy purchased 50 boards. What percentage of the boards must she rent each week to break even (including covering the costs of the boards)? Is the percentage you calculated different from the expected rental rate of 80% in parts "a" and "b"? Briefly explain

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

Auditing And Assurance Services

Authors: Timothy Louwers, Penelope Bagley, Allen Blay, Jerry Strawser, Jay Thibodeau

9th International Edition

1266285997, 978-1266285998

More Books

Students also viewed these Accounting questions