Exercise 4 Calculating Fixed Costs, Variable Costs and BEP
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Month | Meals Served (Service Volume) | Total Costs |
July | 3,600 | $21,000.00 |
August | 4,100 | $22,000.00 |
September | 4,300 | $23,150.00 |
October | 4,700 | $24,500.00 |
November | 4,800 | $25,500.00 |
December | 4,900 | $26,200.00 |
The total contracted meals for the year is 33,000
The contracted cost per meal is 6.50
Step 1:Compute the difference inservice volume (number of meals served) between the high and the low time periods (months). Subtract the low time period from the high time period.
High Time Period Service Volume | Low Time Period Service Volume | Difference in Service Volume |
Step 2:Compute the difference incostsbetween the high and low time periods (months). Subtract the low time period from the high time period.
High Time Period Costs | Low Time Period Costs | Difference in Cost |
Step 3:Compute the variable cost per unit of service. Divide cost by service volume
Cost (Difference between high & low time periods â€“ Step 2) | Service Volume(Difference between high & low time periods â€“ Step 1) | Variable Cost Per Unit |
Step 4:Compute thetotal variable costs for the low time period. Multiply variable cost per unit by service for low time period.
Variable Cost Per Unit (answer from Step 3) | Service For Low Time Period | Total Variable Cost |
Step 5:Compute total fixed costs for the low time period. Subtract total variable cost from low time period cost.
Low Time Period Cost | Total Variable Cost (answer from Step 4) | Total Fixed Cost |
Step 6:Compute the Break-Even Point using the BEP Formula PX = A + BX, where:
P = Cost Per Meal
X = What you are solving for
A = Total Fixed Costs (from Step 5)
B = Variable Cost Per Unit (from Step 3)
Show calculations below:
Step 7:Compute the BEP for the year by multiplying the answer from Step 6 by 12.
BEP (from Step 6) | Months in the Year | Annual BEP |
Step 8: Determine the number of meals by subtracting the BEP for the year (answer from Step 7) from the Total Contracted Meals (see scenario).
Total Contracted Meals | BEP | Number of Meals |
Step 9: Determine the Revenue using the number of meals (answer from Step 8) multiplied by the contracted cost per meal.
Number of Meals | Cost Per Meal | Revenue |
Step 10: Determine the Total Cost using the number of meals (answer from Step 8) multiplied by the variable cost (Step 3).
Number of Meals | Variable Cost | Total Cost |
Step 11:Subtract the Total Cost (Step 10) from the Revenue (Step 9) and this is your Profit
Revenue | Total Cost | Profit |
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Exercise 4 Calculating Fixed Costs, Variable Costs and BEP
NOT RATEDMonth Meals Served (Service Volume) Total Costs July 3,600 $21,000.00 August 4,100 $22,000.00 September 4,300 $23,150.00 October 4,700 $24,500.00 November 4,800 $25,500.00 December â€¦
7 years agoExercise 4 Calculating Fixed Costs, Variable Costs and BEP
NOT RATEDMonth Meals Served (Service Volume) Total Costs July 3,600 $21,000.00 August 4,100 $22,000.00 September 4,300 $23,150.00 October 4,700 $24,500.00 November 4,800 $25,500.00 December 4,900 $26,200.00
â€¦
6 years ago