Topics: Variable cost, Costs, Revenue Pages: 8 (1736 words) Published: December 8, 2012

200320042006
Sales space (sq. ft.)10,23010,23015,280
Sales per square foot\$839 \$792 \$701
Sales Tickets5,3415,3166,897
Ave. sales ticket1,607\$1,524 \$1,553

Changes in Breakeven and Margin of Safety
Modified to Variable Costing Income Statement to Show Contribution Margin
200320042006
Sales \$8,583 8,10210,711
Less variable costs:
Cost of goods sold4,3264,1325,570
Commissions 429405536
Contribution Margin\$3,828 \$3,565 \$4,605

Less Fixed costs
Salaries2,0212,0813,215
Rent420420840
Depreciation8484142
Misc.5393122
Total expenses3,2503,3535,011
Net Income578212-406

CM per unit\$0.72 \$0.67 \$0.67
Breakeven in # of tickets4,5355,0007,505

CM ratio0.44600.44000.4299
Break-even sales (in thousands) \$7,287.03 \$7,620.20 \$11,655.34

Margin of safety\$1,295.97 \$481.80 (\$944.34)

The problem is attributed mainly to the fact that expenses went up due to the new location. The new location drove up costs, the main ones being rent, depreciation, and commisions. And eventhough sales went up, it was not enough to make up for the differences in added costs. Hallstead needs to increase sales in order to cover the new costs.

20062007
Sales space (sq. ft.)15,28015,280
Sales per square foot\$701 \$686
Sales Tickets6,897\$7,500
Ave. sales ticket\$1,553 \$1,397.70
\$10,711,000.00 \$10,485,000.00

Reduction in Price
20062007
Sales 10,711\$10,485
Less variable costs:
Cost of goods sold5,5705,013
Commissions 536482
Total Cost...