Question

Ramada Company produces one golf cart model. A partially complete table of company costs follows:

Number of golf carts produced and sold		1,500		2,000		2,500
Total costs
Variable costs	$	?	$	840,000	$	?
Fixed costs per year		?		600,000		?
Total costs		?		1,440,000		?
Cost per unit
Variable cost per unit		?		?		?
Fixed cost per unit		?		?		?
Total cost per unit		?		?		?

Required:
1. Complete the table.

2. Ramada sells its carts for $1,050 each. Prepare a contribution margin income statement for each of the three production levels given in the table.

4. Calculate Ramada’s break-even point in number of units and in sales revenue.

5. Assume Ramada sold 1,000 carts last year. Without performing any calculations, determine whether Ramada earned a profit last year.

6. Calculate the number of carts that Ramada must sell to earn $30,000 profit.

7. Calculate Ramada’s degree of operating leverage if it sells 2,050 carts.

8. Using the degree of operating leverage, calculate the change in Ramada’s profit if sales are 10 percent less than expected.

Answer 1