Accounting Module 2 Learning Activity

Name: MABUNAY, HANNAH JEAN B.
Course & Year: BSBA-MM 2
MODULE 2
LEARNING ACTIVITY:
EXERCISE 1
• Before the Campaign (existing)
No. of Units 200,000

Rent $100
Best Eastern Motel

Contribution Margin Income Statement
Revenue $20,000,000
Less: Variable Costs 8,000,000
Contribution Margin $12,000,000
Less: Fixed Costs 5,000,000
Net Income. $7,000,000
(𝑠𝑎𝑙𝑒𝑠 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠)

𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝑴𝒂𝒓𝒈𝒊𝒏 𝑹𝒂𝒕𝒊𝒐 =
𝑠𝑎𝑙𝑒𝑠
$20,000,000 − $8,000,000
=
$20,000,000
$12,000,000
=
$20,000,000
= 𝟎. 𝟔 𝒐𝒓 𝟔𝟎%
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
𝑩𝒓𝒆𝒂𝒌 − 𝒆𝒗𝒆𝒏 𝒊𝒏 𝑺𝒂𝒍𝒆𝒔 𝑫𝒐𝒍𝒍𝒂𝒓𝒔 =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑅𝑎𝑡𝑖𝑜
$5,000,000
=
0.6
= $𝟖, 𝟑𝟑𝟑, 𝟑𝟑𝟑. 𝟑𝟑𝟑
𝒐𝒓 $𝟖, 𝟑𝟑𝟑, 𝟑𝟑𝟑
𝑴𝒂𝒓𝒈𝒊𝒏 𝒐𝒇 𝑺𝒂𝒇𝒆𝒕𝒚 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑆𝑎𝑙𝑒𝑠 − 𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑆𝑎𝑙𝑒𝑠
= $20,000,000 − $8,333,333.333
= $ 𝟏𝟏, 𝟔𝟔𝟔, 𝟔𝟔𝟔. 𝟔𝟕
𝒐𝒓 $𝟏𝟏, 𝟔𝟔𝟔, 𝟔𝟔𝟕
• After the Campaign
Proposed (10% increase)
Best Eastern Motel

Revenue $22,000,000
Less: Variable Costs 8,800,000
Contribution Margin $13,200,000
Less: Fixed Costs $5,000,000
500,000 5,500,000
Net Income $7,700,000
(𝑠𝑎𝑙𝑒𝑠 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠)

𝑠𝑎𝑙𝑒𝑠
$22,000,000 − $8,800,00
=
$22,000,000
$13,200,000
=
$22,000,000
= 𝟎. 𝟔 𝒐𝒓 𝟔𝟎%
𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝑩𝒓𝒆𝒂𝒌 − 𝒆𝒗𝒆𝒏 𝒊𝒏 𝒔𝒂𝒍𝒆𝒔 𝒅𝒐𝒍𝒍𝒂𝒓𝒔 =
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜
$5,500,000
=
0.6
= $𝟗, 𝟏𝟔𝟔, 𝟔𝟔𝟔. 𝟔𝟔𝟕 𝒐𝒓 $𝟗, 𝟏𝟔𝟔, 𝟔𝟔𝟕
𝑴𝒂𝒓𝒈𝒊𝒏 𝒐𝒇 𝑺𝒂𝒇𝒆𝒕𝒚 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑠𝑎𝑙𝑒𝑠 − 𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑠𝑎𝑙𝑒𝑠
= $22,000,000 − $9,166,666.667
= $𝟏𝟐, 𝟖𝟑𝟑, 𝟑𝟑𝟑. 𝟑𝟑

𝒐𝒓 $𝟏𝟐, 𝟖𝟑𝟑, 𝟑𝟑𝟑
EXERCISE 2
FALL-FOR-FUN COMPANY
Product 1 Product 2 Product 3 Total

(Parachutes (Hang Gliders) (Bungee Jumping
Harnesses)
Amount Percent Amount Percent Amount Percent Amount Percent
Sales $600,000 100% $800,000 100% $200,000 100% $1,600,000 100%
Less:
Variable $400,000 67% $700,000 87.5% $100,000 50% $1,200,000 75%
Costs
Contribution $200,000 33% $100,000 12.5% $100,000 50% $400,000 25%

Margin
a.) Find the Break-even Point in Sales Dollars.
(𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠)

𝑆𝑎𝑙𝑒𝑠
$1,600,000 − $1,200,000
=
$1,600,000
$400,000
=
$1,600,000
= 𝟎. 𝟐𝟓 𝒐𝒓 𝟐𝟓%
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠
𝑩𝒓𝒆𝒂𝒌 − 𝒆𝒗𝒆𝒏 𝑷𝒐𝒊𝒏𝒕 𝒊𝒏 𝑺𝒂𝒍𝒆𝒔 𝑫𝒐𝒍𝒍𝒂𝒓𝒔 =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑃𝑒𝑟 𝑅𝑎𝑡𝑖𝑜
$240,000
=
0.25
= $𝟗𝟔𝟎, 𝟎𝟎𝟎
b.) Margin of Safety

𝑴𝒂𝒓𝒈𝒊𝒏 𝒐𝒇 𝑺𝒂𝒇𝒆𝒕𝒚 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑠𝑎𝑙𝑒𝑠 − 𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑆𝑎𝑙𝑒𝑠
= $1,600,000 − $960,000
= $𝟔𝟒𝟎, 𝟎𝟎𝟎
EXERCISE 3
a.) If it charges $25 a child per day, what will be it’s break-even point expressed in dollars of
revenue?
𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠

𝑆𝑎𝑙𝑒𝑠
$25 − $10
=
$25
$15
=
$25
= 𝟎. 𝟔 𝒐𝒓 𝟔𝟎%
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝑩𝒓𝒆𝒂𝒌 − 𝒆𝒗𝒆𝒏 𝑷𝒐𝒊𝒏𝒕 𝒊𝒏 𝑺𝒂𝒍𝒆𝒔 𝑫𝒐𝒍𝒍𝒂𝒓𝒔 =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑅𝑎𝑡𝑖𝑜
$300,000
=
0.6
= $𝟓𝟎𝟎, 𝟎𝟎𝟎
b.) How much revenue would be required for Early Horizons Day Care to earn $100,000 net
income per year?
𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠 + 𝑇𝑎𝑟𝑔𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

𝑼𝒏𝒊𝒕𝒔 𝒂𝒕 𝑻𝒂𝒓𝒈𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
$300,000 + $100,000
=
15
$400,000
=
15
= 𝟐𝟔, 𝟔𝟔𝟔. 𝟔𝟔𝟔𝟔𝟕 𝒖𝒏𝒊𝒕𝒔

𝑜𝑟 𝟐𝟔, 𝟔𝟔𝟕 𝒖𝒏𝒊𝒕𝒔
𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 = 𝑢𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑(𝑠𝑎𝑙𝑒𝑠)

= 26,666.66667 𝑢𝑛𝑖𝑡𝑠($25)
= $𝟔𝟔𝟔, 𝟔𝟔𝟔. 𝟔𝟔𝟔𝟖
𝒐𝒓 $𝟔𝟔𝟔, 𝟔𝟔𝟕
Early Horizons Day Care

Revenue $666,667
Less: Variable Costs 266,667
Contribution Margin $400,000
Less: Fixed Costs 300,000
Net Income $100,000

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Name: MABUNAY, HANNAH JEAN B.

Course & Year: BSBA-MM 2

• Before the Campaign (existing)

No. of Units 200,000

Best Eastern Motel

(𝑠𝑎𝑙𝑒𝑠 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠)

• After the Campaign

Proposed (10% increase)

Best Eastern Motel

(𝑠𝑎𝑙𝑒𝑠 − 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠)

= $𝟗, 𝟏𝟔𝟔, 𝟔𝟔𝟔. 𝟔𝟔𝟕 𝒐𝒓 $𝟗, 𝟏𝟔𝟔, 𝟔𝟔𝟕

𝑴𝒂𝒓𝒈𝒊𝒏 𝒐𝒇 𝑺𝒂𝒇𝒆𝒕𝒚 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑠𝑎𝑙𝑒𝑠 − 𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑠𝑎𝑙𝑒𝑠

= $𝟏𝟐, 𝟖𝟑𝟑, 𝟑𝟑𝟑. 𝟑𝟑

Product 1 Product 2 Product 3 Total

Amount Percent Amount Percent Amount Percent Amount Percent

Sales $600,000 100% $800,000 100% $200,000 100% $1,600,000 100%

Contribution $200,000 33% $100,000 12.5% $100,000 50% $400,000 25%

a.) Find the Break-even Point in Sales Dollars.

(𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠)

b.) Margin of Safety

𝑆𝑎𝑙𝑒𝑠 − 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡𝑠

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠 + 𝑇𝑎𝑟𝑔𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

= 𝟐𝟔, 𝟔𝟔𝟔. 𝟔𝟔𝟔𝟔𝟕 𝒖𝒏𝒊𝒕𝒔

𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 = 𝑢𝑛𝑖𝑡𝑠 𝑠𝑜𝑙𝑑(𝑠𝑎𝑙𝑒𝑠)

Early Horizons Day Care

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