Custom Car Care, Ivey

Topics: Variable cost, Management accounting, Contribution margin Pages: 2 (299 words) Published: November 18, 2010
Q.3 Break-even analysis

Cost analysis of Glenn’s custom car care for 1st year

|Fixed cost towards rent garage & office |$ 14400 | |($ 1200 per month) | | |Utilities ($ 100 per month) |$1200 | |Telephone ($35 per month) |$420 | |Advertisement- (yellow page 2inch*2 inch $996 + 6000 flyers cost $360) |$1356 | |Insurance cost @ $100/month |$1200 | |Total fixed cost |$18576 | |Variable cost per unit |$20 | |Contribution margin (return per unit-variable cost) |$80 | |Return per unit $100 | | |*Glenn’s nephew salary @ $60/day |$18780 |

No of car services at Break-even point = fixed cost Contribution margin per unit

QBEP is 232 or 116 days for Glenn, when he worked alone and given services to mid and low price group charging $100 per car wash.

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