Cost Volume Profit: Rent for the location is $825 per month and wages amount to $4,175 per month...?

Question

Subway, selling sandwiches, is located on a busy corner near many other businesses.  Their busiest time is during the mid-day period.
 
Rent for the location is $825 per month and wages amount to $4,175 per month.  Variable costs consist of supplies and sandwich ingredients that cost $2.31 per sub sandwich.  The subs are sold at a price of $8.21 each.
 
Answer each of the following questions.  Round your monetary final answers properly to two decimal places.  Round UP your final answers in units to the nearest whole number.
Caution:  Each sub question is INDEPENDENT from one another.  You must go back to the original given values when answering these questions.
 
a)  How many sandwiches must they sell to break even?
 units.
 
b)  If they increase the variable costs by $0.20 per sandwich, how many sandwiches must they sell to break even?
  units.
 
c)  If the rent increases by 10%,  what would their profit be if they sold 1 600 units?
$

Hosam · Answer

a) Total Cost = Total Profit

$825 + $4,175 = n ( $8.21 - $2.31 ) = n ($5.90)

n = $5000 / $5.90 = 846 sandwiches per month

b) In this case n = $5000/ $5.70 = 877 sandwiches per month

c) Profit = 1600 * ($8.21 - $2.31) - $825*1.1 - $4,175 = $4357.50

? · Answer

--------------a)------------b)--------c)
Price ea....8.21........8.21
Variable.....2.31........2.51
Gross.......5.90........5.70

Rent................825...........907.50
Labor............4,175.........4,175.00
Total fixed.....5,000.........5,082.50

a) Cost = Gross profit (note that net profit is zero at break even):
$5,000.00/$5.90 = 847 sandwiches needed to break even

b) $5000.00/$5.70 = 877 sandwiches

c) 1600*$5.90 = $9,440.00 gross profit
$9,440.00 - $5,082 = 4,357.50 is your profit and your answer

Note: 9,440 is your GROSS PROFIT, this is, sales - variables. Iif they ask you what your total SALES or your total REVENUE are -these two words are often used interchangeably- just multiply the price per sandwich by units sold, like this: Total sales 1600*8.21 = $13,136.00
P.S.: Just saw your question, I was not available yesterday. Feel free to let me know if I can be of help again.

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Cost Volume Profit: Rent for the location is $825 per month and wages amount to $4,175 per month...?

2 Answers