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Exercise 3.2
New Budgeted Profit
New Food & Beverage Cost			$ 600,000.00
Old Food & Beverage Cost			$ 519,451.47
Reduction in Profit			$ 80,548.53
Budgeted Profit			$ 166,794.43
Reduction in Profit			$ 80,548.53
New Budgeted Profit			$ 86,245.90
New Variable Rate
Cost of Food and Beverage			$600,000.00
Variable Labor Cost			$247,441.58
Variable Employee Benefits			$61,860.40
Total Variable Costs			$909,301.98
New Variable Rate
VR=	VC
	S
VR=
VR=
New Contribution Rate
CR = 1 - VR
CR =
CR =
New Break Even
BE =	FC + P
	CR
BE =
BE =
Sales Level Necessary to Earn a Profit of $166,794.43
S =	FC + P
	CR
S =
S =
S =
Number of Customers Necessary to Break Even
SU =	FC
	Average Contribution Margin

Exercise 3.2

Using the Excel spreadsheet:

Assume that variable costs are not controlled and that budgeted costs

of sales for food and beverage increase to $600,000 and total sales are as budgeted ($1,665,472.20). Calculate profit for Barnabys Hideaway. All other costs remain the same.

Calculate the new variable rate and new contribution rate, assuming the same variable salaries and employee benefits.

Calculate the break-even point for Barnabys Hideaway using the new contribution rate.

Using the new contribution rate, calculate the sales level necessary for Barnabys Hideaway to earn the budgeted profit of $166,794.43.

Assume that the new contribution margin falls to $12.60. Calculate the number of customers necessary to break even.

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