Q1. Shine Bright Housekeeping provides two types of housekeeping services, Basic and Gold. It charges customers $30 for a unit of Basic service and $50 for a unit of Gold service. Its direct costs in providing each unit of service are:

Basic $9, Gold $15. All other costs of the business are fixed and total $7,350 per month.

In all the sub-parts of this part (i.e., part 3.1, 3.2, etc.), assume that Shine Bright always provides a constant mix of the two services, namely 3 units of Basic service for every 2 units of Gold service....

3.1 What is Shine Brights Contribution Margin Ratio (CMR)?

Contd.

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3.2 How much Sales Revenue should Shine Bright generate monthly to report Net-Income-after-tax (NIAT) of $11,760? The income tax rate is 20%. Use the CMR concept.

3.3. What is Shine Brights Degree-of-Operating-Leverage (DOL) at the Sales Revenue computed in part 3.2 above?

3.4. Using the DOL concept to get your answer, what will be Shine Brights NIAT if the Sales Revenue falls 10% from the level in part 3.2 ?

4. Using B to stand for units of Basic service, and G to stand for units of Gold service, specify the equation whose solutions are the combinations of the amounts of the two services that would allow Shine Bright to break-even each month.

That is, specify the break-even function f (B, G) = where C is a constant.