Professional Documents
Culture Documents
lilLr uirrr, ;,:,llapse in 2001 and2002. Consider eBay's situation at that time. In the first quarter of 2001,
rllltu, -l,,.ned revenue of $ 154 million and operating expenses of $ 123 million, for an operating profit
m ,iii; :,:llion. In the first quafier of 2002, eBay reported that revenue had increased 59%, to $245
rmuLL'.lrln, :Ba)"s fixed costs were $37 million and variable costs vary with the amount of revenue.
- :rr:ule eBay's operating income for the first quarter of 2002 and its percentage increase in
,rry.:rt1ns income between 2001 and2002.
- :-r:.rrn how eBay managed to increase its income so much with only a 59oh increase in revenue.
Adding a Frmdcret
rlill{t[]lri i 3i:'.r. Pub, iocated near State University, serves as a gathering place for the university's more
ii{il [LlliuJ r-trlars. Mac sells draft beer and all brands of bottled beer at a contribution margin of $.60 a
lllilliti]jtr
rr,t"l; is
considering also selling hamburgers during selected hours. His reasons are twofold. First,
rirrrrLfinrul',,ll--:'isuould attract daytime customers. A hamburger and a beer are a quick lunch. Second, he
lllllllllllr :i.1 :,fft competition from other local bars, some of which provide more extensive menus.
,iiillinittuc I r.mled a selling price of $I .20 per hamburger to lure many customers. For all questions, assume
i, .ilirllLi,."0nr, nonth.
i;i are the monthly and daily break-even points, in number of hamburgers?
lu'
'l r.,; ie end of 2 months, Mac finds he has sold 3,600 hamburgers. What is the operating profit per
on hamburgers?
nr: L-.:rL
uu qi,rtk- :hirrks that at least 60 extra beers are sold per day because he has these hamburgers available.
Jrl:i means that 60 extra people come to the bar or that 60 buy an extra beer because they are
ur";'red by the hamburgers. How does this affect Mac's monthly operating income?
.r 4.;::r ro requirement 3. How many extra beers would have to be sold per day so that the overall
:'s:;ts of the hamburger sales on monthly operating income would be zero?
I :* Governrr?#sit Srgenizatimn
q" ulrllur:;L,*elfareagencyhasagovernmentbudgetappropriationfor20XT of$900,000.Theagency's
ililrllffri,nr :r:;ion
is to help disabled persons who are unable to hold jobs. On the average, the agency sup-
lurliLrllivrtur::s each person's income by $5,000 annually. The agency's fixed costs are $290,000. There are
tnllll firilxii: .'osts.
[ompare the sales cost structure of Kellogg's with that of Post. Which has the larger fixed cost?
In-.hich has the larger variable cost? Howwill this affect each company's risk? (Focus on how the
iompany's profits change with changes in volume.)
Tthat incentives does each pay system provide for the sales force?
\frght either incentive system create potential ethical dilemmas for the sales personnel? Explain.
I"ES Sales-Mix Analysis
iuu,r,ut-' -{ppendix 24. The Rocky Mountain Catering Company specializes in preparing Mexican din-
rnums-r.at it freezes and ships to restaurants in the Denver area. When a diner orders an item, the restau-
urmr leats and serves it. The budget data for 20X5 are
Product
Ghicken Tacos Beef Enchiladas
Selling price to restaurants $5 $7
Variable expenses 3 4
n Contribution margin $2 $3
Number of units 250,000 125,000
St
rg
"llflihu :r:mpany prepares the items in the same kitchens, delivers them in the same trucks, and so forth
llllllM:re. decisions about the individual products do not affect the fixed costs of $735,000.
rtllXiusl Daii', revenues vary among classes of patients. For simpliciry assume that there are two classes:
lli ll ilffiir_r"B) patients (S) who pay an average of $1,000 per day and (2) non-self-pay patients (G) who
unfir; lfrse of insurance companies and government agencies and who pay an average of
(es =sponsibility
$frlllllflilltl|l pr,Ja1.. Twenty percent of the patients are self-pay.
i lnpute
the break-even point in patient-days, assuming that the hospital maintains its planned
:,ipatients.
m:*.
l*. $r,rcc,r'se that the hospital achieves 225,000 patient-days but that 25%o of the patient-days were
rmf*:.4 (instead of 20%). Compute the net income. Compute the break-even point.
S 56 *ncome Taxe$ on Hotels
the s;rendix 28. The Four Winds Hotel in downtorvn Phoenix has annual fixed costs applicable to
t$liltllrtfu,
nrmrrrrnmrns :: S9.2 million for its 600-room hotel, average daily room rates of $105, and average variable
nta urrrrunmrL lr 515 for each room rented. It operates 365 days per year. The hotel is subject to an income tax