calculation of break even sales using cvp


Calculation of break even sales using CVP formula.

The following are the monthly fixed expenses for Peyton Travel:

Office rent:

$3,000.00

Depreciation of office furniture

200

Utilities

110

Telephone

520

Reservation Service Fees 

380

Travel Agent Salaries

1,400.00

Variable expenses include the following:

Travel Agent Commission

5.0% of sales 

Advertising

6.0% of sales 

Supplies and Postage

1.0% of sales 

Telephone and Reservation Service usage fees

3.0% of sales

a) Use the contribution margin ratio CVP formula to compute Peyton Travel's break-even sales in dollars. If the average sales price of a ticket is $660.00; how many tickets must be sold to reach break-even?

b) Use the income statement equation [revenue - (variable expense + fixed expense) = operating income] to compute the dollar sales needed to earn a target monthly operating income of $6,290.00. How many tickets is this if the average sales price of a ticket is $660.00?

c) Assume the average sales price decreases to $440.00 per ticket. Use the contribution margin approach to compute Peyton Travel's new break-even point in tickets sold. How does this compare to your answer in part a)?

Request for Solution File

Ask an Expert for Answer!!
Financial Accounting: calculation of break even sales using cvp
Reference No:- TGS0451798

Expected delivery within 24 Hours