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CH 4 Assignment

Gulf Shore Lawn and Garden Maintenance provides lawn and garden services. Lawn maintenance has higher variable costs of $14.40 per hour than garden maintenance's $7.20 per hour. The company's overall contribution margin ratio is 46% and its break-even point is $134,400 in sales or 5,600 hours. To break even, they need 4,480 hours of lawn care and 1,120 hours of garden maintenance. To earn a $53,760 after-tax profit at a 30% tax rate requires $251,269 in sales.

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82 views3 pages

CH 4 Assignment

Gulf Shore Lawn and Garden Maintenance provides lawn and garden services. Lawn maintenance has higher variable costs of $14.40 per hour than garden maintenance's $7.20 per hour. The company's overall contribution margin ratio is 46% and its break-even point is $134,400 in sales or 5,600 hours. To break even, they need 4,480 hours of lawn care and 1,120 hours of garden maintenance. To earn a $53,760 after-tax profit at a 30% tax rate requires $251,269 in sales.

Uploaded by

Mikulas Harvanka
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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5/15/2021 Assignment Print View

 
1. Award: 20.00 points
 

Gulf Shore Lawn and Garden Maintenance provides two general outdoor services: lawn
maintenance and garden maintenance. The company charges customers $24.0 per
hour for each type of service, but lawn maintenance has higher variable costs ($14.4
per hour) than garden maintenance ($7.2 per hour) because of fuel expenses incurred
to operate lawn-mowing equipment. All employees are paid a fixed monthly salary. A
contribution format income statement for a recent month for the two services appears
below. During the month, 8,000 hours of lawn maintenance services and 2,000 hours of
garden maintenance were provided:

Lawn Per Garden Per


Maintenance Hour Maintenance Hour To
Sales $ 192,000 $ 24.0 $ 48,000 $ 24.0 $ 24
Variable expenses 115,200 14.4 14,400 7.2 12

Contribution margin $ 76,800 $ 9.6 $ 33,600 $ 16.8 11

Fixed expenses 6

Operating income $ 4

Required:
1. Compute the overall CM ratio for the company.

Overall contribution margin ratio 46 %

2. Compute the overall break-even point for the company in sales dollars.

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5/15/2021 Assignment Print View

Overall break-even
$ 134,400
point

3. Compute the weighted-average CM per hour for the company. (Do not round
intermediate calculations. Round your answers to 2 decimal places.)

Lawn Garden
Care Maintenance
Weighted average CM per hour $ 7.68 $ 3.36

4. Calculate the overall break-even point for the company in hours.

Total break-even point in hours 5,600 hours

5. At the overall break-even point in total hours, how many hours of each service must
be provided for the company to break-even?

Lawn Garden
Care Maintenance
Number of hours 4,480 1,120

6. Calculate the overall sales in dollars required to earn an after-tax profit of $53,760 if
the tax rate is 30%.

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5/15/2021 Assignment Print View

Sales required to achieve after-tax target profit $ 251,269

References

Worksheet Learning Learning Objective: 04-09 Compute


Objective: 04-06 the break-even point for a multi-
Determine the product company and explain the
level of sales effects of changes in the sales mix
needed to on the contribution margin and the
achieve a desired break-even point.
target profit.

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