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Managerial Accounting - Angelino Food Services Company

P2-A2; Cost Volume Profit and Vending Machines

Angelino Food Services Company operates and services soft drink vending machines locate in restaurants, gas stations, and factories in four southwestern states. The machines are rented from the manufacturer. In addition, Angelino must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 40 machines. Fixed monthly expenses follow:

Machine rental: 40 machines @ 43.50 $1,740
Space rental: 40 locations @ 28.80 1,152
Part-time wages to service the additional 40 machines 1,908
Other fixed costs 200
Total monthly fixed costs $5,000

Other data follow:

Per Unit Per 1000 of Sales
Selling Price $1.00 100%
Cost of soft drink .80 80
Contribution margin .20 20%

QUESTIONS:

- What is the monthly break-even point in number of units?
In dollar sales?

- If 36,000 units were sold, what would be the company's net income?

- If the space rental cost was doubled, what would be the monthly break-even point in number of units? In dollar sales? Refer to the original data (above).

- If, in addition to the fixed rent, Angelino paid the machine manufacturer $.04 for each unit sold in excess of the break-even point, what would the new net income be if $36,000 units were sold? Refer to the original data (above).

Solution Summary

Angelino Food Services Company operates and services soft drink vending machines locate in restaurants, gas stations, and factories in four southwestern states. The machines are rented from the manufacturer. In addition, Angelino must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 40 machines. Fixed monthly expenses follow:

$2.19