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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Extensions of the CVP Model—Semifixed (Step) Costs
Sam’s Sushi serves only a fixed-price lunch. The price of $10 and the variable cost of $4 per meal remain constant regardless of volume. Sam can increase lunch volume by opening and staffing additional check-out lanes. Sam has three choices:
| Monthly Volume Range (Number of Meals) | ?Total Fixed Costs |
1 Lane | 0–5,000 | $33,000 |
2 Lanes | 5,001–8,000 | 39,000 |
3 Lanes | 8,001–10,000 | 52,500 |
Required
a. Calculate the break-even point(s).
b. If Sam can sell all the meals he can serve, should he operate at one, two, or three lanes? Support your answer.
Verified
Step 1 of 4
a.
Calculate break-even point
Break-even point is the level of operations at which the revenue and total costs (variable costs and fixed costs) become equal. There is no profit or no loss at break-even point level.
The entity serves only a fixed price lunch. The price is $10 per meal and the variable cost is $4 per meal.
Calculate the break-even point using the following equation:
Step 2 of 4
Step 3 of 4
Step 4 of 4
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