Business, 16.10.2020 14:01 mariabarcenas6807

William Company owns and operates a nationwide chain of movie theaters. The 500 properties in the William chain vary from low volume, small town, single-screen theaters to high volume, big city, multi-screen theaters. The management is considering installing machines that will make popcorn on the premises. These machines would allow the theaters to sell popcorn that would be freshly popped daily rather than the pre-popped corn that is currently purchased in large bags. This proposed feature would be properly advertised and is intended to increase patronage at the company's theaters. Annual rental costs and operating costs vary with the size of the machines. The machine capacities and costs are as follows:

Economy Regular Super
Annual capacity (boxes) Cost 50,000 120,000 300,000
Annual machine rental $8,000 $11,000 $20,000
Popcorn cost per box 130 130 130
Other costs per box 220 140 050
Cost of each box 080 080 080

Required:
a. Calculate the volume level in boxes at which the economy popper and regular popper would earn the same profit (loss).
b. Management can estimate the number of boxes to be sold at each of its theaters. Present a decision rule that would enable William's management to select the most profitable machine without having to make a separate cost calculation for each theater.
c. Could management use the average number of boxes sold per seat for the entire chain and the capacity of each theater to develop this decision rule? Explain your answer.

Answers: 3

Show answers

Answers

Answer from: studyoverload

William Company

a) Volume level in boxes at which the economy popper and the regular popper would earn the same profit (loss):

Economy Regular Difference in costs

Total Fixed costs $58,000 $131,000 $73,000

Total Variable costs per unit $430 $350 $80

Volume = Difference in fixed costs/Difference in variable = $73,000/$80

= 912.5 boxes

b. Decision rule: We assume a selling price of $1,000 per box, then based on this selling price, we calculate the contribution per box. The decision rule is to purchase the machine that has the least break-even point in sales unit.

Economy Regular Super

Total fixed annual costs $58,000 $131,000 $320,000

Selling price per box $1,000 $1,000 $1,000

Total variable cost per box $430 $350 $260

Contribution per box $570 $650 $740

Break-even point = 101.75 201.54 432.43

The most profitable machine is the Economy Popper since it has the least break-even point. This is the point at which management will start realizing some profits after covering all the fixed costs.

c. Management may not be able to use the average number of boxes sold per seat for the entire chain and the capacity of each theater to develop this decision rule. Using this will be complicated. But, using the break-even point for each machine is a lot easier and simpler to implement.

Explanation:

a) Machine Capacities and Costs Data and Calculations:

Economy Regular Super

Annual capacity (boxes) Cost 50,000 120,000 300,000

Annual machine rental $8,000 $11,000 $20,000

Total fixed annual costs $58,000 $131,000 $320,000

Popcorn cost per box 130 130 130

Other costs per box 220 140 050

Cost of each box 080 080 080

Total variable cost per box $430 $350 $260

Answer from: Quest

what is wrong with black soap shampoo?

explanation:

Answer from: Quest

hi there, i would say your answer is:

b. there is a fixed quantity of resources and technology available.

hope that : )

Another question on Business

Business, 21.06.2019 16:00

b) a student tests 100 students to determine whether other students on her campus prefer soda brand a or soda brand b and finds no evidence that preference for brand a is not 0.5. later, a marketing company tests all students on campus and finds no difference. choose the correct answer below.

Answers: 1

Answer

Business, 22.06.2019 04:10

An outside manufacturer has offered to produce 60,000 daks and ship them directly to andretti's customers. if andretti company accepts this offer, the facilities that it uses to produce daks would be idle; however, fixed manufacturing overhead costs would be reduced by 75%. because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. what is andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?

Answers: 3

Answer

Business, 22.06.2019 05:10

1. descriptive statistics quickly describe large amounts of data can predict future stock returns with surprising accuracy statisticians understand non-numeric information, like colors refer mainly to patterns that can be found in data 2. a 15% return on a stock means that 15% of the original purchase price of the stock returns to the seller at the end of the year 15% of the people who purchased the stock will see a return the stock is worth 15% more at the end of the year than at the beginning the stock has lost 15% of its value since it was originally sold 3. a stock purchased on january 1 cost $4.35 per share. the same stock, sold on december 31 of the same year, brought in $4.75 per share. what was the approximate return on this stock? 0.09% 109% 1.09% 9% 4. a stock sells for $6.99 on december 31, providing the seller with a 6% annual return. what was the price of the stock at the beginning of the year? $6.59 $1.16 $7.42 $5.84

Answers: 3

Answer

Business, 22.06.2019 22:30

Ellen and george work for the same company. ellen, a gen xer, really appreciates the flextime opportunities, while george, a baby boomer, takes advantage of the free computer training offered at the company. these policies are examples of

Answers: 3

Answer

You know the right answer?

William Company owns and operates a nationwide chain of movie theaters. The 500 properties in the Wi...

Questions