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CVP Analysis to Compute the Contribution Margin Ratio

1. Compute the contribution margin ratio for the rooms department.
2. Compute the Baker Inn's weighted average CMR.
3. Compute the Baker Inn 's breakeven point.
4. If the Baker Inn wants to make $1500000, what must its room sales equal?
5. If the Baker Inn desire a pretax cash flow of $500000, what must its total revenue equal? Assume its debt reduction payments total $500000 for the year.
Also assume it would like to pay $250000 in cash dividends during the year.
6. The food department manager has proposed running an advertisement in the local paper to get more Sunday brunch business.
Assume the display as will cost $500. How many meals must be sold to make $300 pretax profit on this proposal?
Assume the average meal sells for $12.00.

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Solution Summary

A CVP analysis is given to compute the contribution margin ratio and the weighted average CMR. The breakeven point is given.